INVESTMENT PERFORMANCE

Detailed below is our model portfolio investment performance, which we use to create new client investments. At future reviews we compare your own funds to the current ideal model, to determine whether we recommend changes to your investments.

The data shown is the investment performance of our actual model portfolios. This gives an indication of the past performance of these strategies, but will vary for individuals based on their own circumstances, the timing of their investments, withdrawals, tax, charges, and other individual factors.

Take a look at our model portfolio investment performance data…

You can view the investment performance data in the table below.

We have also provided further explanatory information below the potential growth figures, which explains how our investment philosophy is helping clients to deal with the Coronavirus crisis.

About this investment performance data

The investment performance shown is prior to any investment charges, in Pounds Sterling, to 31st March 2020. These figures are not guaranteed to be repeated in any way, and capital invested can fall as well as rise. Past performance is not a prediction of future performance.

POTENTIAL GROWTH

The below figures illustrate the growth you might have received, had you invested £300,000 in the above model portfolios 5 years prior to the date of the investment data.

  • Cautious – £24,928
  • Moderate – £28,138
  • Adventurous – £15,915

* How these calculations work These results show the investment growth you might have received, had you invested £300,000 in the model portfolios 5 years prior to the date of the investment data, based on the actual returns delivered over that period. Please bear in mind that these figures are in no way guaranteed, but are designed to give you an understanding of the potential benefit of employing us as advisers.

The calculations assume that your investments grew by the published 5-year annualised return, based on the risk profile shown. In practice the returns of your portfolio will depend on the timing of your investment, the actual funds selected, and the tax position. Therefore, these figures cannot be guaranteed, and will prove to be different to the results shown. We have also assumed you will pay 1% charges for your investment wrapper and funds, plus our published advice fees. Again, the actual charges will depend on the solutions recommended to you. This shows the investment growth after all charges, but prior to tax and any withdrawals.

Stock market volatility

Stock markets had a very difficult time in the first quarter of 2020, falling in value due to fears over economic impact of the Coronavirus. It is normal and understandable to be fearful when seeing these changes. As a result, our model portfolio performance is showing growth lower than what we would typically expect.

This information gives further details of how our investment philosophy prepares our clients for crises like the Coronavirus. To read more about our investment philosophy go to: https://www.woodruff-fp.co.uk/our-investment-philosophy/

In any long-term investment it is inevitable that you will occasionally suffer short-term, temporary falls in value. The important thing is to make the sensible decisions necessary to ensure that your long-term financial security is not affected.

Should you change your investments?

The answer, is to try to ignore your understandable fears, and focus on the messages of the government. We have been reassured that the government is taking the necessary measures to see the economy through this period, and that they will do “whatever it takes” to allow business to continue.

If you have invested wisely, this money has been saved for the long term. If you stick to your investment strategy, it should work in your favour over the medium to long term. Any changes you make now might cause significant harm in your future as you will inevitably lock in losses.

Our client portfolios were growing nicely before the crisis, and recent falls have pulled back these gains. The result is not as bad as you might fear. Our quarterly valuation statements showed short-term losses, but less than the UK stock market.

How should you approach temporary market declines?

Investments are volatile – they all go up and down in value. In the past, all stock market falls have proved to be a temporary drop as part of a general rise in value over the longer term.

Typically, stock markets temporarily fall in value by 10% or more about once a year on average. The last major fall was at the end of 2018, and the UK stock market rose significantly after that point.

Longer-term investment market falls happen regularly too. In the last 100 years, the average bear market saw a fall of 36%, but the average bull market saw a rise of 507%. The point is that we cannot avoid temporary declines, but calm and patience will see this situation turn around for you.

How would any temporary fall affect your lifestyle?

Setting up investments as we advise allows you to wait out any market declines. This is because you should have alternative strategies in place to cope with the fall in value.

Would any temporary fall in value could have an impact on your current or future standard of living?

If you do not currently rely on your investments for income then a temporary market decline is unlikely to be a major issue for you.

We advise all clients to have enough cash to be able to cope with short-term market falls; if you are taking an income from your investments you are likely to have a cash buffer of up to 2 years of variable income. This will allow you to wait out the temporary fall in value.

The illustration below shows how we approach this with many clients:

 

Diversification

Our clients spread their assets around a variety of different asset types, and geographical regions. You cannot predict ahead of time which assets will perform the best, or worst at any stage. This approach should work in your favour when markets fall in value.

You cannot avoid temporary market declines, whatever your investment strategy, but diversification can limit some market losses when stock markets fall in value. This is why it is important to keep cash separate from your investments, to allow you to cope at difficult periods.

Bear in mind that your own investments will have performed differently, based on your portfolio, the charges, income etc.

Expect a range of investment returns

Unfortunately investments do not perform in a nice linear way. You should expect a range of returns, which give a general average over time. See below, which illustrates this point:

Woodruff Financial Planning typical investment returns

This chart shows how the current performance of our model investments are still within normal parameters.

Do not attempt to time the market

Do not be tempted to pull your money out of the stock market just because it has fallen temporarily. Markets change very quickly, and it is impossible to know whether we are the top or bottom of the market. You are better off holding your nerve, and listening to your financial planner. Take sensible decisions for your long-term security, keep enough cash to cope with short-term needs, and try not pay too much attention to today’s values.

Market turbulence

Market turbulence

The information above shows this in practice. It shows the UK stock market over the past 20 years. The red shows the worst point of the stock market during that year, and the blue where it ended up had you just left your investments alone. In almost every year there was a significant temporary decline, but in 19 out of 20 years the position was better by the end of the year.

What we do know is that if you sell now, you will simply lock in those temporary losses, and you will miss the inevitable rally when it comes.

 

HOW DO WE MANAGE YOUR INVESTMENTS?

Read our Investment Philosophy guide

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Dan Woodruff. Certified Financial Planner and Chartered Wealth Manager, Colchester, Essex

Unit 5, Park Lane Business Centre, Park Lane, Langham, Colchester, Essex CO4 5WR

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