The archetypical image of a traditional stockbroker would be a well shoed individual wearing a pin stripe suit with red braces: shouting buy or sell into at least two phones, possibly whilst scribbling something in his Filofax.
Here in 2023, the world has moved on, writes Paul Surguy, managing director and head of investment management & proposition at Kingswood Group.
Investors are more likely to be found in chinos, a pair of brown brogues and a polo shirt, although the colour is probably still a bit too bright.
Now, let’s move on to the world of investment. Gone are the days when someone should be selling you one line of stock, or if we are honest, even a single strategy fund.
Coming out of the worst year many investors have seen in their careers, where bonds – not high yield – but the ultimate safety of gilts were amongst the worst performing assets. Barely any asset class gave you a positive return. Despite the strong start to 2023, many investors will be wondering what they can do this year to make up for lost ground.
Decision making
The first piece of advice here must be – don’t base your decision on what did well or badly last year. Stay away from phrases such as Santa Rally, January Effect, sell in May and go away, buy the dip, sell the rally to name just a few. We have all been drawn into these in the past.
The key to long term outperformance is to have an ever-evolving portfolio where evolution and not revolution is the mantra. As humans we all have impulses and can be affected by what has happened recently, or we have seen on the news. By being disciplined and having a long-term focus to your investment approach you can avoid impulsive decisions based on short term market movements.
This disciplined approach needs to be coupled with both patience and diversification. Patience is perhaps the hardest of these – understanding that everything might not work out from day one but continues to warrant a place in a diversified portfolio. Whilst diversification on a macro level didn’t provide the protection that it has done historically in 2022, at a holding level, this still remains crucial to long term performance.
Being able to regularly review portfolios, especially during periods of enhanced volatility means that significant numbers of clients can benefit from volatility. What often gets forgotten is that volatility can be good for returns – giving investors the opportunity to tilt their portfolios towards opportunities that present themselves. This means not having set rebalance periods but being able to be dynamic when appropriate.
Finally, working in conjunction with a financial advisor and an investment manager will give clients the best of both worlds. Financial advisers give a holistic view of a client’s overall circumstances and are able to select from a broad church of products and services whilst an investment manager can sit back from this and focus entirely on investing. By working as a team, the client experience and servicing will be significantly enhanced.
Conclusion
In summary, over the past year the investment landscape has morphed into a whole new environment. Bonds, aka fixed income, are once again not only investable but also likely to deliver a pleasing income return. Equities in many areas are also looking better value.
Your scribe strongly believes that 2023 will be a significantly better year than 2022. Now then, where did I leave those brogues?
This article was written for International Adviser by Paul Surguy, managing director and head of investment management & proposition at Kingswood Group.
