As we enter a new phase of the Lockdown, some restrictions are eased, schools return and businesses reopen, I thought this would be a good time for another quick Portfolio Performance Review.
The first Chart shows how a range of our Portfolios have performed since the severity of the pandemic became apparent and as such it includes the impact of the stock market crash from 20th February in all its gory detail.
As you can see, the markets started falling on 20th February and didn’t really stop until 23rd March.
There has of course, been something of a recovery since then and this has provided holders of cash with a wonderful opportunity to buy into our Portfolios at prices that we haven’t seen for a couple of years. Portfolio 60 was essentially 20% cheaper on 23rd March than it had been just a month earlier and as we know, when things are on sale it’s a good time to snap up some bargains!
The next Chart looks at the same Portfolios during the mini ‘recovery’ since 23rd March.
To put some numbers to this, if you had been lucky enough to invest say, £500k on 23rd March into Portfolio 60, you would have made a cool £68,950 whilst being cooped up at home or doing the garden – easy money! If you had invested in Portfolio 100 (you would have been very brave), you would be up a remarkable £121,050!
Investing, like most things, is incredibly easy with hindsight but who honestly would have had the courage to make such an investment in March, when things looked so grim? Those prices look like a bargain now but they certainly didn’t at the time.
I often hear people say that ‘they might dip their toe in the water again when markets settle down a little’ but of course it’s that ‘settling down’ that represents the growth you don’t want to miss.
Another way of looking at this is to consider an investor who held a Portfolio of £500k in EBIP 60 on 20th February. They would have been down about £100k by 23rd March but by keeping a level head and doing nothing, approx. £50k of this would now have been returned to them. Remember, you only make a permanent loss if you sell, otherwise it’s just temporary!
The first graph shows that there is still a long way to go before we get back to where we were in February but if you are sitting on any surplus cash at the moment, it’s still not too late to take advantage of these lower values.
I wouldn’t be doing my job of course, if I didn’t point out that, in the short-term, there is absolutely no guarantee that things won’t suddenly get much worse from here and values could even fall below where we were in March. The current position is reflecting the optimism that many businesses will soon be back to normal but what happens if there is a second spike in 3 weeks or so, for example?
Short-term investing is not for the feint-hearted but for long-term investors these dips can be genuinely great buying opportunities.
As always, please do feel free to call me at any time to discuss anything that might be concerning you.
Have an enjoyable rest of the week in what remains of the sunshine.
With best regards,
Yours sincerely
Graham Ponting CFP Chartered MCSI
Managing Partner
