Equities  

Why now is the time to prepare and protect portfolios

  • Understand the definition of risk and how behavioural attitudes affect investment decisions.
  • Learn how to select the appropriate funds for client portfolios.
  • Be able to help clients protect themselves and their portfolios in the event of a downturn in markets.
CPD
Approx.30min

This could be a recipe for potential disappointment. Whenever momentum carries the price of an individual stock well beyond any reasonable estimate of the intrinsic value of the underlying business, the declines in value can be very swift and severe. The same applies to indices.

Only time will tell if the recent market volatility is just routine turbulence or the start of something more ominous.

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Either way, it was clearly a stern warning that stocks can still go down as well as up and a reminder to think carefully about risk if your clients haven’t already.

Investors should resist the urge to attempt any Johnny Sexton-like moves with their money and instead think about the hours and hours of preparation and practice that allowed him, and the Irish team, to perform under pressure.

Focus on drip-feeding money into the market on a regular and frequent basis in order to take the emotion and stress out of the process.

And encourage clients to maintain a healthy cash buffer so they are not forced to sell into market panics and can perhaps take calculated risks when conditions are extreme.

None of that advice is very exciting, but that’s precisely the point. It shouldn’t be.

Dan Brocklebank is head of UK at Orbis Investments

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. Robert Shiller's cyclically-adjusted price-earnings ratio is often touted as what, because of its correlation with long-term returns?

  2. According to Mr Brocklebank, the behaviour penalty is typically how much per annum?

  3. Short-term market fluctuations are essentially irrelevant if assets are what?

  4. Why does Mr Brocklebank say investors should rule out any management team with less than 10 years' investment experience?

  5. Mr Brocklebank makes the following statement about passive investing, true or false? 'The inherent flaw in a passive strategy is that it will tend to be overweight cheap securities and underweight expensive ones.'

  6. What does he say will help to take the emotion and stress out of the investment process?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Understand the definition of risk and how behavioural attitudes affect investment decisions.
  • Learn how to select the appropriate funds for client portfolios.
  • Be able to help clients protect themselves and their portfolios in the event of a downturn in markets.

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