War in Europe has sent global stock markets tumbling, but experts have urged savers to hold onto their investments.
Many investors have been left nursing losses in their Isas after the FTSE 100, which tracks London’s largest listed companies, and the S&P 500, the American benchmark index, both slumped 4pc in just five days. But even as stocks fell, wealth managers warned against pulling out of the market entirely.
Adrian Lowcock, an independent investment expert, said investors should try to focus on their long-term financial goals. “Markets fall quickly when there is a crisis, and they could fall further if there is an escalation in Ukraine,” he said. “But stocks are also capable of recovering quickly, too. It is impossible for most of us to predict what will happen in Europe, so investors should focus on what they can control.”
He added: “Selling in a panic usually results in realising a loss. It is much harder to know when to buy back in again. But buying during periods of volatility usually works out better, so investors should stick to a steady drip feed into their portfolio.”
Hamish Baillie, who co-manages the £769m Ruffer Investment Company, said with interest rates so low and inflation so high, now was one of the worst times to keep your money in cash. The trust holds 10pc of its assets in cash.
“Short-term it is great, because it means you have dry power to deploy into falling investments,” he said. “But its spending power is being very quickly whittled away by inflation. You do not want to be sitting on a significant proportion of cash over the next few years. It’s a terrible long-term holding. ”
Mr Lowcock added that while investors should not make any knee-jerk reactions, it was important to include a mix of strategies in a portfolio. “For investors who want a more defensive style, I would recommend the Threadneedle UK Equity Income fund. It invests in a range of ‘blue-chip companies’, such as the pharmaceutical giants AstraZeneca and GlaxoSmithKline.”
Mr Lowcock also highlighted the Troy Trojan investment trust, which specialises in wealth preservation over growth. “It invests across a number of asset classes, such as bonds, cash, gold and stocks,” he said.
Philip Miton, a financial adviser, said investors should consider commercial property investment trusts, as the sector has held up well despite volatility in the wider market. “They are still trading at cheap discounts, even though their customers continue to pay their rent and provide reliable income,” he said. “There is structural value here, and investors receive a dividend too.”
He highlighted the BMO Real Estate Investments which has delivered returns of 10pc in the past three years and traded at a 30pc discount to the value of its net assets.
Mr Miton also tipped the Aberdeen Diversified Income & Growth trust. “It is designed to act like an absolute return fund,” he said, referring to the fund class which is designed to grow in all market conditions. “It caught our attention because it was trading at a deep 15pc discount.”
Mr Lowcock added that the BNY Mellon Real Return fund was a strong pick for “defensive” investors. “It has a core defensive portfolio, and invests in smaller satellite holdings from stocks, bonds to more complex investments such as derivatives and futures.”
For more aggressive investors who wanted to grow their money rather than just preserve it, Mr Lowcock pointed to the oil giants Shell and BP. “These companies were performing well before the crisis, with very robust cash flows. Now they are also benefiting from rising oil prices,” he said.