With the Office for Budget Responsibility forecasting a recession for the whole of 2023, you could be forgiven for thinking that maybe shares are not the right place for your money. But, at Murdoch we’re fond of saying that not all fund managers are the same so even during a recession there are profits to be made.
What is a recession?
A buoyant economy would normally grow each year. The growth or decline of the economy is measured by looking at the value of the goods and services the country produces. This is called the Gross Domestic Product (GDP). When the GDP falls for two quarters in a row, it’s called a recession. The latest statistics show that UK GDP fell by 0.2%, in the third quarter of 2022.
Understanding the markets
There’s a phrase that’s used in the world of investments – “The difference between Main Street and Wall Street”. It means that what’s happening to companies day to day is often different to what’s happening in the markets. When a recession happens, the investment markets have often predicted its arrival and already factored in price changes in shares. This can mean that by the time the news outlets are reporting the recession and you’re considering your options, share prices will have fallen.
It’s important not to panic at this point. When we look back at the stockmarket crash of 1987, it’s a blip on the overall rise of the FTSE100 in the past 35 years. If you sell at the bottom of the market, not only will you sell at a loss, but you’ll also lose out when the market recovers.
Have faith in your funds
Recession is only one threat to your wealth over time. Volatile stock markets, poor performance, taxation, low interest rates and high inflation will also affect your wealth.
At Murdoch, we believe all these factors can be mitigated by traditional long-term investing in good quality companies within a diversified portfolio. Quality research, an objective overview of your investments, patience, holding your nerve in volatile markets and taking decisive action will all help you hang on to your wealth over time.
Time in the market, not timing the market
Timing when to buy shares is notoriously difficult and best left to the professionals. What’s important is time in the market. Staying invested, even when there’s a recession can be profitable in the long term. Remember, you only lose your money if you sell at a loss. If you can afford to do so, sit on your investment until it begins to grow again.
Not all fund managers are the same
One of the key ways we can help you grow your money is to look under the bonnet of the investment funds we recommend and thoroughly research the fund managers running the fund and the companies they invest in. You just need to take a look at the Best vs Worst performance chart in this newsletter to see what a difference choosing the right manager makes.
If you want to know more about who’s managing your personal portfolio or you’d like to review your current investments, please give us a call on 01420 83517 or email firstname.lastname@example.org.
Disclaimer – This document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based on its content. The Financial Conduct Authority does not regulate tax and trust advice or wills.