WORLD INVESTMENT MARKETS

2010 has been an incredibly volatile year to date on world stock markets. 

The key point to remember is that stock markets aren't based on what is happening now but on what they perceive will  happen in the next 5 or 6 months. The markets have priced in the recovery to a large extent already. However, the next question is whether the recovery is sustainable or whether we are likely to slip into a double dip recession.

Markets hate uncertainty and the fact that we cannot yet be certain that the recovery in the UK and the developed world will continue has resulted in a huge spike in volatility. Ultimately markets are likely to remain volatile until a clear direction for the economy has been established.

We produce regular Market Commentaries which will hopefully answer a lot of the current concerns you may have whilst also giving further insight into Capital Tower's investment philosophy. Do contact us if you wish to discuss any point further.

If you are a client and would like to be added to our email list to receive future editions of market commentary please tell your Capital Tower consultant or e mail us at admin@capitaltower.co.uk with Market Commentary Listing in the subject box.

ASSET ALLOCATION

Much has been made of the importance of asset allocation. This means choosing the right mix between Equities (UK and/or Other countries and regions), Fixed Interest (UK or global), Property, and Cash. Many industry commentators and the media will have you believe that over 90% of the investment return achieved is about getting this asset allocation right. Our own belief is that this simply isn't true and in some cases is an argument put forward to promote software systems developed by some investment companies that will bias towards their own mix of funds.

Asset allocation systems use historical data to determine the mix of assets - this of course does not neccessarily provide an accurate guide to future investment returns. This has been proven over the last 18 months, with the reckless lending behaviour of banks, culminating in the well documented 'credit crunch'. This has resulted in lower risk assets such as commercial property (in particular) and fixed interest not providing any stability to investment portfolios, as all asset classes (apart from commodities) have fallen at the same time - a situation that has only very rarely occurred previously.

Therefore in these difficult investment conditions it is much more important to both choose the right fund(s) and just as importantly to move out of the wrong fund(s) and into good alternative(s). 

When we choose funds we base our selection on many things but key is the consistent performance of the funds. Where a fund's performance against its peers changes - especially dramatically - we will recommend alternatives.

Because we predominately use WRAP ACCOUNTS we have the choice of all the open funds in a given sector; i.e. in the UK All Companies sector this means currently some 361.

We do not just choose the best fund over 1 year or any given period; we look for a consistency and also try to understand how the fund manager works to achieve the returns. Most importantly, we also look at the volatilty rating of funds, which helps us to determine whether undue risk is being taken to acheive these returns. 

Building and running a portfolio is not just about asset allocation it is about the right advice at the right time to make sure your money is always working hard for you. It is vitally important that the funds you invest in have been chosen using the right process of research and also that these are reviewed regularly.

We have also shown below a number of investment strategies and views presented by different companies; all based around the theme of not panicking in this current volatile market. Please click on each item to see the details:

Time Not Timing

Long Term View

When doing nothing is best.

Benefitting from Volatility

Please feel free to discuss any of these issues with us.