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The third quarter of 2019 has been an interesting one for investors, to say the least. With political news both at home and abroad causing some dramatic market swings, volatility has been on the rise throughout the quarter. We know that increased market turbulence can be a concern for our investors, so in this issue of FundsTalk we wanted to focus on some of the issues it might raise for your clients.
Our first article takes an in-depth look at the recent market volatility with the aim of offering some context and perspective. Volatility has actually been historically low in recent years, and the occasional spikes we’ve seen since last December are well within normal ranges. Mitigating the effects of short-term volatility involves keeping a long-term focus and investing in a diversified, multi-asset portfolio – and it’s worth remembering that volatility can also present an opportunity to invest in more shares at lower prices.
That’s why amid volatile market conditions, it’s more important than ever to keep long-term investment objectives in mind. Our next article covers the benefits of a long-term approach to investing, which include compounding interest, the added value of dividend payments, and capturing gains when markets rebound – which can happen very quickly. By contrast, selling out of an investment when prices are low means missing out on a subsequent recovery. What’s more, switching to cash makes investors more vulnerable to inflation and currency pressures eroding the value of their savings.
On the topic of value, there has been ever-increasing scrutiny from the regulators on what constitutes “value for money” in pension fund charges – in addition to costs, it’s also important to consider investment returns, the reassurance of ongoing monitoring and governance, and the quality of customer service. The next article in the issue takes a closer look at how regulators are working to define value for money.
Finally, as an example of the benefits of multi-asset investing and a long-term focus, we present the latest in our series of interviews with external fund managers. In this issue, we meet Tim Wilson, who heads the SW Newton Managed Fund, one of the largest funds in the Scottish Widows range. The Newton Managed Fund is a multi-asset fund of funds, which – despite having made just two asset allocation changes in ten years – has consistently outperformed its peer group. Tim and his colleague, Bhavin Shah, sit down with the team to discuss how they’re positioning the fund for the current market climate.
We hope you enjoy this edition of FundsTalk and that you’ll find some useful talking points to use with your clients who may be concerned about recent market activity. As always, we welcome your feedback and ideas for articles you would like to see us cover in future.
Head of Fund Proposition
Scottish Widows Investment Strategy & Execution
Volatility has been on the rise throughout the quarter.