What should you do with your investments as markets fall? Five financial gurus respond

Between them, they have racked up nearly 130 years working in the City, managing investment funds worth billions of pounds on behalf of investors – through thick and thin.

Five hugely experienced fund managers who passionately believe that stock markets reward long-term investors, however painful the present may be.

We asked them for their views on where stock markets go from here – and for any practical advice they can give to readers…

Five hugely experienced fund managers who passionately believe that stock markets reward long-term investors, however painful the present may be

Andrew Bell: Light at the end of the tunnel

Andrew Bell is chief executive of Witan, a £1.2billion global investment trust that has grown its dividend for each of the past 45 years. The trust parcels out its assets to a number of investment houses to manage – companies that have specialisms in specific areas such as emerging markets, Europe and Asia. 

Over the past five years, the trust has registered a loss of 4.7 per cent, compared to a 10 per cent fall in the FTSE All-Share Index. Bell has overseen the portfolio for the past decade.

He says: ‘I am a private investor as well as manager of Witan Investment Trust whose shareholders are mostly private individuals. This does not give me any monopoly of wisdom but it means I spend a lot of time thinking like a private investor.

I am not immune to the scary feeling we all get when the price of our investments falls very rapidly.

However, being no spring chicken, I have seen quite a few panic sell-offs – some driven by overvaluations, some by a shock that moves the investment goal posts.

I have seven suggestions to avoid being caught up in this frenzy:

Patient: Andrew Bell of trust Witan

Patient: Andrew Bell of trust Witan

1. First and most important, stay safe and look out for others. We need each other as neighbours and family. Enjoy the extra time at home.

2. The best way to avoid panicking is to know your own risk appetite, diversify and take trusted advice if you need to.

3. Don’t sell what you wish you had sold a month ago – if you shut the stable door, your horse can’t come back.

4. Fear and opportunity move in tandem in financial markets. Volatility is fed by people reacting, not thinking.

5. Things that have fallen in price are usually better value – be guided accordingly.

6. Sometimes, markets are mad. The value of sound businesses varies less than the share price.

7. Regular savings can help avoid worries about timing the bottom.

All panics are resolved by time and price. Time allows the problem to be resolved and price represents the market’s impatience to get to a level that discounts the bad news.

The steps being taken to combat the outbreak and offset its economic effects are truly dramatic. Combined with the big equity correction, the table is tipping in long-term investors’ favour.’

Peter Spiller: Time to be calm

Peter Spiller is chief investment officer of City Gearing, a £450million investment trust whose mandate through the good and bad times is to preserve shareholders’ wealth. He has run the trust since 1982 and spreads its portfolio across a range of assets. Over the past five years, the fund has generated a total return of 23 per cent.

He says: ‘My career in the City has spanned nearly 50 years. Once a decade, roughly, financial markets have found reason to run very scared. Each time there’s been a different cause but each time the fear has led investors to act in a similar way.

Fear is magnified this time because the likely economic damage of the coronavirus has come with an oil price collapse and the plausible risk of a disorderly disintegration of the euro. As with many previous periods of turmoil, the current difficulties are made worse by high debt levels, especially among businesses. 

The bad news is magnified further because investors had been blinded previously by a bull market, with prices of many sought-after shares inflated to levels reminiscent of the early 1970s. By the start of this year, global investors had let optimism and complacency into the driving seats and, having ratcheted up the rollercoaster, there was so much further to plunge.

It is too early to start thinking about the next upside, even though some share prices look decidedly cheap. But as soon as investors feel able to grasp the size of the problems, confidence will return.

Things may well get worse before they get better but if credit can flow, the economy can rebuild itself.

It remains possible that the impact of the coronavirus will recede within a couple of months as healthcare measures, coupled with coordinated government and central bank actions, loosen the knots that had taken hold.

One of the great investment truisms is to be greedy when others are fearful and fearful when others are greedy.

For now, it’s appropriate to be calm rather than brave. When the time comes, courage will best serve those with level heads.’

'While the downturn will be painful, markets have moved a long way to discount the bad news which is yet to come on the economy and on corporate profits', says Paul Niven

‘While the downturn will be painful, markets have moved a long way to discount the bad news which is yet to come on the economy and on corporate profits’, says Paul Niven

Paul Niven: Focused on the long term

Paul Niven is manager of Foreign & Colonial, the country’s oldest investment trust (launched in 1868). The £2.6billion trust is invested globally and has increased its dividend for 49 successive years. Over the past five years, it has generated combined returns of 15 per cent.

Niven took over the reins in June 2014, but has worked in the City since the late 1990s. He is employed by asset manager BMO.

He says: ‘As a result of measures introduced to prevent the spread of Covid-19, we now face a serious near-term contraction in the global economy. This will place tremendous strain on both consumers and corporate businesses, and there is a significant risk that the recovery, when it comes, will be impaired by the severity of the downturn.

We cannot tell when the current crisis will end. Investors are questioning whether monetary and fiscal policy action will be effective in shoring up economies, as it has been historically.

They are also closely monitoring the spread of Covid-19 and, here, there is some hope that a moderation in the pace of new cases in China and some European countries may indicate that containment measures are effective.

Nonetheless, while the downturn will be painful, markets have moved a long way to discount the bad news which is yet to come on the economy and on corporate profits. F&C Investment Trust has the tremendous advantage of a robust capital structure which has proven resilient through many crises and has a diversified equity exposure.

While the near-term will remain challenging, I remain focused on long-term opportunities.’

Sue Noffke: No knee-jerk reactions

Sue Noffke is head of UK equities at investment house Schroders and has spent 27 years in the City. Since July 2011, she has run the £126million investment trust Schroder Income Growth. 

Its emphasis is on providing a growing income from a portfolio of mainly blue-chip firms – GlaxoSmithKline, Legal & General and British American Tobacco. In the past five years, the trust has recorded total losses of 21 per cent. The solace has been a growing income, from 10.3p per share in the year to September 2015 to 12.4p in the last financial year.

'Governments and authorities have learnt from prior situations, particularly the 2008 financial crisis – and have been quick to offer support for people', says Sue Noffke

‘Governments and authorities have learnt from prior situations, particularly the 2008 financial crisis – and have been quick to offer support for people’, says Sue Noffke

She says: ‘These events are very concerning but from the perspective of stock markets, they underline the importance of taking a long-term investment approach and resisting knee-jerk reactions.

The pandemic has caused the fastest decline in markets on record as efforts to deal with the virus have hit activity everywhere, at the same time. Understandably, this is unnerving investors. I have experienced several market corrections in my career. While this is one of the most challenging yet, investors can take comfort from the response by global policymakers. 

Governments and authorities have learnt from prior situations, particularly the 2008 financial crisis – and have been quick to offer support for people, economies and the financial system (such as Thursday’s cut to the Bank of England’s base rate to 0.1 per cent).

Yes, there will be a recession in the UK with hits to economic activity, profitability, dividend income and employment as companies struggle. But I believe authorities will do ‘whatever it takes’.

This support may take a while to gain traction, but history shows us that financial markets typically move to discount a future fall in company earnings. It is reassuring that markets have, on the whole, recovered well following abrupt market corrections in the past.’ 

Alasdair McKinnon: This too shall pass 

McKinnon has run global investment trust Scottish since 2015 and has been an investment manager for more than 18 years. The trust has 36 years of annual dividend increases and over the past five years has registered a small loss of 0.3 per cent.

He says: ‘Stock markets might not be front of mind during a human tragedy like this, but the dramatic moves in recent weeks have no doubt been very unsettling for many investors.

When investors recover from the shock of a sudden downturn, it’s natural to ask what next? It’s not much fun being invested during such episodes and we cannot be certain how significant the impact will be. But we do know that, eventually, it will pass. The sell-off will create attractive opportunities amid the indiscriminate selling.

It is important to position in anticipation of changing conditions. We increased exposure to investments with resilient revenues and downsized parts of the portfolio that are more economically sensitive.

In the months ahead, we will be looking out for signs that confidence is starting to improve. Key will be finding the economic cure, as well as the medical cure, to this crisis.’

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