Killik Explains: Three key words for investors in 2019

welcome to this Killick explains finance video this week three key words for investors in 2019 and two of them at least are particularly important in 2019 because things have changed little bit since about September 2018 in other words we've enjoyed a ten-year bull run more or less since the last financial crisis if you look into equities things have clearly changed how you approach these change conditions will be critical to your long-term investing success from here onwards now the background is basically what well 2018 was pretty uncomfortable ok in other videos I show that major stock indices failed to even be cash over the full year basically it was a very difficult year to make money even with hindsight as John authors put it on Bloomberg all major indices enter the year down here are three terms therefore that will be important your approach in 2019 they're not new they're not rocket science but they're too easily forgotten so word one is uncertainty yes you will need to get used to the idea that markets are unbreakable in 2019 there are so many ways in which unpredictability could pan out this year sources include brexit that's the big one if you're a UK investor will it happen will it happen on time what sort of form will it take soft not so soft hard no deal who knows the trick as an investor is not to get distracted it's fascinating viewing it's almost sort of car crash viewing in one sense but don't get distracted by it the path of interest rates number two that's critical behind all the political shenanigans in the UK the path of interest rates the Bank of England's policy on interest rates the European Central Bank and above all the Federal Reserve vital how far how fast will rates be lifted keep an eye on inflation data don't be overly distracted by the politics and the end will reverse their QE this is going on behind the scenes the Americans have started it ahead of everybody else if you like this is reversing the program of printing money as it was known QE bond-buying putting the lever back reversing that out the speed and the way it's done will have an impact on our surprises as we go through the year there in Trump in the trade war that's not helping so Donald Trump seems intent on pursuing this trade war with China how wide it goes how long it lasts clearly influencing stock prices and confidence emerging markets including China separate to anything Donald Trump's up to we've seen evidence of some slowing in the market in China property markets and so on so that giving us the world's biggest emerging market and one of its fastest growing emerging markets that's pretty key by itself and finally leaving brexit ones I'd European discord and economic divergence Germany for example the powerhouse of Europe shown a few signs of creaking recently but not so many signs as Italy arguably France macrons France that is with the yellow best protests and so on and of course Greece so watch out for signs that the European economy is creaking separate when a decision about brexit that may be reached by the EU and the UK now the key as I mentioned in a moment is not to get unduly distractive all this stuff but here's a word you should be distracted by liquidity investors often forget about this they just think risk in financial markets is all about that the prices go up go down how far how fast but this risk matters arguably as much if you need to get your money off the table how quickly can you do it and can you do it at a price that you want now liquidity under suggests this year need to be monitored three ways individuals need to make sure as I stress at the end that they're not forced into selling shares for example because they simply haven't planned they simply have mapped out there any day funds the foreseeable calls on capital and so on companies watch out if you're an investor don't just pay attentions to earnings beats misses or I p/e ratios make sure you're focusing on the quiddity their ability to pay short-term debt their access to funding if they need it and their overall Giri debt to equity you might say in a bull market great debt can accelerate the returns to equity investors but in the market we're in a moment best be describes a sideways market you need to be looking more carefully at liquidity and finally funds open-ended funds don't quite do what it says in the tens a unit trusts for example can face pressure a lot of investors trying liquid a we've seen this in the commercial property market for example it can put pressure on open-ended funds to meet what are called redemptions and funds that are not organized not sufficiently liquid war potentially it trouble now closed ended funds on the other hand don't face the same pressure so review what type of funds are you in and what sort of liquidity of parameters can they operate within so liquidity not a very exciting word but I think a word that's going to be important to individuals you and me companies in terms of the way you look at them and funds to now the third world if you think is a little bit depressing the third word is opportunity that takes a little bit of steel to recognize this there's the point when food gets cheaper you don't buy less of it that was Warren Buffett point being invest is a prime thing when prices fall it's all bad news but over the long term surely there has to be some opportunity here if you know what you're looking for because you are getting a chance to add the building blocks of a portfolio cheaper than you could six months ago so how are we going to take advantage of this well first of all by recognizing it for what it is the yield on the foots your shares the broad index UK shares around 5% the souther year well there's a fairly generous income incentive for a star and compared to the so-called risk-free bond yield equities do look reasonable value especially in certain pockets as I make this video in January 2019 it takes many confidence to see that sizable Corrections are common so people who don't remember back before the last financial crisis for example might be think more no they're not but actually 10 percent Corrections 10 percent or more are pretty common they're part and parcel about with the investing they're not something to be avoided ducked or even feared they're just something to be accepted and managed and people who haven't invested for a long you've come into the market recently won't be familiar with them and that could potentially didn't make some mistakes a shakeout usually generate bargains now you might think hang on a minute I've taken all this trouble to diversify might with your portfolio and the whole things drop that's called systemic risk yes when the market marks everything down together across the board then you get opportunities if you know you're looking for to pick up bargains to pick up good names for a lot less than you would pay from six months ago now it takes a certain perspective to see that really important mindset to have not gloom and doom across the board so be safe but not sorry bit of a cliche what I mean by that well basically never panic so so do not read media headlines every five minutes don't look on your on your iPhone for example never panic sell one of the forms of that is they do allow you to dump everything really quickly push of a button that's precisely what you shouldn't be doing number two avoid for something now this is not about apps being gray this is about planning this is about having that rainy day fund identifying those four-syllable calls on capital that you'll need to fund in the near future and then allocating the rest to a long term equity basket let's say so that planning is more important than ever make sure you are reviewing imminent foreseeable calls and capital and positioning your funds accordingly thirdly Pam cost average if you are worried about going to the market right now don't go in with a lump sum drip feed your way in be sensible about it because that'll mean that you're taking advantage of these dips I mean panel cost averages they get it right almost automatically buy on some of the dips if you like and that over the long term pays back dividends as I point out in other videos prepare rather than bleep nobody knows exactly where stock marks lend up again to 2019 no one has that crystal ball all right but preparation is key so yes this year it's a fair assumption will probably be more uncertain and more volatile than previous years that's just the law of averages that happens in stock markets from x time that will terrify short-term gamblers and will push many hedge funds to the wall potentially you might say well so what okay if you are terrified by short-term correction than the stock market you probably shouldn't be in the stock market in the first place rational long-term investors very much more sanguine all right they'll stick to their plan they'll spot opportunities to pick up bargains that are just the way they aim to the market Pam cost averaging and so on and carry on so the conclusion is change we control manage what you don't i short-term volatility and know the difference so you do control your portfolio allocation you do control your planning but you don't control the stock market except that manage it so what are you mad at plan get your fan planning blaze actively you do this on a regular basis anyways you're thinking well I already do that I already read it six months ago I'm already well positioned the last crucial number to diversify the old investing feature but it is important diversify across asset classes diverse finds nationally the best for across different sectors okay make sure you are not overly committed to one type of asset or asset class thirdly discuss bear markets and markets that the volatile can be scary it's it's worrying when a portfolio standard ear 10% so discuss discuss with family members discuss with an advisor for whatever you do make sure you have a conversation with somebody if we just hit the red button game what I'm out because then you got to worry about how I'm just gonna cost you get out how much tax you might be paying capital gains tax and so on and when on earth do you get back in again lots of ground covered three key messages editor at Killick on with queries and to watch videos on some of the things I mentioned Pam cost averaging for example tax if that's a key concern to you then Killa calm forward slash learn and click on the tabs on the left-hand side

Channel: Killik & Co

Views: 4,981

Rating: 5 out of 5

Keywords: How to invest, the best way to invest, how the stock market works, cash is king, stock market performance, why buy shares, how to buy shares, bonds, government bonds, investors 2019, how to invest 2019, tim bennett, killik explains, killik and co, killik & co, finance explained, bull market, uncertainty, brexit, interest rates, trump, trade war, emerging markets, liquidity, p/e ratio, funds, debt to equity, close ended funds, opportunity, ftse all share, equity investors

Id: 2CTQ8RsSmQw

Length: 10min 10sec (610 seconds)

Published: Fri Feb 01 2019