Its Not Harry

Comment and opinion for retail investors in the UK

Mark Potter

Overpaying for investment services?

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My attention was drawn by a reader to a piece on the Consumer Reports (www.consumerreports.org) website that fully backs up the comments I make in my “How to” articles about selecting an adviser and ensuring you actually get what you are paying for.

What is interesting about this is that it is from the USA.  The basic message is exactly the same – the public don’t get proper disclosure of fees and services even though there is legislation in place that is supposed to make that happen.

One caveat, if you do read the US piece:  organisations like Vanguard are cheap and crusaders for good value but they do rather over ‘package’ their investment offerings and you need to be sure of what you are getting.  At times they are, in my view, adding risks that are not so well disclosed as their fees

Markets get real

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The sharp sell off in global stock markets is no surprise to me.  I have been pessimistic for some time and especially so in recent weeks.  My October Watching Brief anticipated the problems that would come from rising US interest rates and better returns from medium dated US treasury stocks.  Morningstar published a video yesterday saying almost exactly what I wrote at the start of he week.  There is some consensus that the sell off is for genuine logical reasons, an actual change in the underlying facts, not just the need for a ‘correction’ to bank profits and so on.

October is often a month when markets get jittery and I have said to many clients when I was an adviser that I always see October and January as the two most risky months for investors.  

So, is this just volatility that can be safely sat out?  It depends of course on your investment time horizon and cash flow needs.  As I explain in articles elsewhere on the site, all investment planning objectives need to be assessed in terms of the need for cash flows.  So, if you have not prepared for a sell off and you are going to need cash in the near term, your adviser ought to telling you to get on with selling investments that are rich with decent gains as soon as possible.  If you have an adviser, give them a ring now.  If you are running your own portfolio, it is time to assess the risks carefully.

Of course, I don’t believe that you should sell your whole portfolio in the hope of buying back into markets at a lower price.  That sort of ‘timing’ speculation  only ever works if you get lucky.  Not even the best investment managers in the world can consistently sell near the top of markets and buy at the bottom.  But if you do raise some cash now and don’t need to extract it for spending later, you will have some liquidity to pick up any bargains that come along if there is a real rout.

The market pendulum always swings too far at the end of the cycle, both up and down.  So a swing down into a bear market will be overdone, at some future date.  Then we can all look to new money making opportunities – there are not many to be found at the moment.

Profit taking (skimming/slicing) – is there a trick to it?

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One of my readers has suggested an article giving general advice on when to take profits and in what sort of proportion would be useful.

This is a subject with several aspects.  How do you know when you are near the top of a market?  Is that even possible?  What about tax?  If you sell out of a good fund, where would you re-invest?  Should you re-invest at all?  Is the old quotation “time in the markets is better than timing the markets” (Anthony Bolton, ex Fidelity) the simple answer?

I can seek to answer these questions or at least propose  a logical way of taking decisions but the topic justifies an article as opposed to just a blog post.  I will add one to the “How to” area as soon as I can.  It will be unrestricted.

Radio Silence!

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There have been no new posts on the site for a couple of weeks because I have been on holiday!  I was in the UK, France and Italy and could claim I was doing important on location research on  Brexit, the potential troubles with the Euro and so on.  But mainly I was enjoying the food and drink (at least on the South of the Channel)!

I did in fact get some anecdotal evidence of what people in France and Italy worry about in terms of economics and politics and that is definitely not Brexit.

The October news and comment will be published very shortly when I will address the current investment climate and the prospects for investors.

The coming war with China

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The above is the title of a 2015 film by the journalist and author John Pilger.  It concentrates on US military ambitions in the Asia Pacific region.  As a record of the arms industry looking for an enemy, it makes for disturbing viewing.

A different sort of war is already under way.  This is the trade war of tariffs, of course.  This has escalated to the point where the first set of options has run out – there is in effect no more trade left to tax.

I read a comment that the Chinese might soon get fed up with being the only adult in the game.  They do have powerful options as heavy buyers and owners of US Treasuries (US government loan stock). They could stop buying new issues or even dump bulk holdings in the market.

Such actions could have very serious repercussions for the global economy.  Let us hope they don’t get provoked beyond that legendary inscrutability.

It is worth remembering that the US president and his party have to play to please an electorate.  No such inconvenience will worry the Chinese leadership.