financial advisor looking into a crystal ball and hopingThe actor Sarah Parish, who became famous in the TV series Peak Practice, summed up the woes of the inexperienced stock market investor recently.

Interviewed by a national newspaper about her attitude to money (which is generally sound and sensible) she was asked what her worst financial experience has been.

She said: “Just before the stock market crash, in around 2007 I think, I was advised to invest in shares in a company and within a week the market collapsed so I lost all my money. It was bad timing mainly.”

The words “bad timing” come naturally to anyone who has lost their shirt or blouse on a stock market punt, and perpetuates the myth – generated by stockbrokers, one suspects – that good or bad timing is all that separates the equities goats from the sheep.

Spotting the market turning point is the Holy Grail of many investors, both professional and amateur, and it invariably ends in disaster.

In today’s fast-moving global economy in which markets can move from growth to loss and vice versa in the blink of an eye, spotting a turning point in time to make money from it is well nigh impossible.

At the time of the writing, the FTSE-100, the UK’s financial bellwether, the one loved by those with the ultimate in short term outlooks, i.e. journalists, had been staging something of a recovery.

Yet only three days previously the “Footsie” was said to be in “bear territory” after it and the other major indices took a tumble over fears that bond markets in China were heading for meltdown.

But with little or no further mention of that impending disaster to scare stock market speculators  (sorry, investors), shares resumed their northward migration.

Just how many of these seemingly inexplicable stock market rises (after all, there’s not much good macroeconomic news around at the moment) are “suckers rallies” fuelled by those hoping to make a quick quid is hard to say.

But they are bound to be more a case of plunging in and hoping for the best than of investing on the strength of a reasoned and rational analysis of market trends.

Anthony Bolton, the former star fund manager at Fidelity, once spelled out the reality of stock market investing.  Professionals, he said, have to analyse data that is not available to ordinary investors, and they have to do so day in, day out.

Even then most of them get it wrong.  Even for a professional with masses of data flashing across his trading screen, spotting a turning point is a hit and miss business.

And what active traders, fund managers included, never take into account is that whether their chosen stocks win or lose, they are constantly incurring charges that can wipe any gains they do make.

We at The Whitehall Partnership subscribe to investment guru Warren Buffet’s dictum that the most intelligent thing any investor can do is – nothing at all.

Investing the Buffet way is all about time in the market, not market timing.  That’s because over time any equities market will find its own equilibrium and smooth out all the ups and downs to deliver capital growth.

The best funds do this, and identifying them is a job for a truly independent and unbiased financial advisor – someone who isn’t going to be influenced by expensive glossy advertising or beguiled by authoritative-sounding “research”.

A good quality financial advisor is essential if you want to discover your tolerance to financial risk and identify a sound mix of assets in which to allocate your wealth.

For a free initial consultation call The Whitehall Partnership on 0845 43 49 250 today.

 

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