We are due to exit "Lockdown II" when this article is to be published. Hopefully, we have exited, and we can look forward to a near normal Christmas. I am not sure that will be the case, however, we can but hope.
This year has been unlike any other in living memory. Who thought they would live through a pandemic after all? Very sadly, not everyone has. You would be forgiven for believing that it has been impossible to have made an investment return in 2020. Certainly, cash has been a disaster with deposit rates at an all-time low and banks being rumoured to be bringing in charges for current accounts.
You would also be forgiven for thinking that the historic levels of Government borrowing have made Gilts worthless too.
Also, surely the stock market is a basket case with the FTSE 100 index having been almost 7,700 points at the beginning of the year but currently (as at the time of writing) trading at just over 6,000 points. That is a fall of around 20%. You would be forgiven for believing that it must be impossible to obtain a positive return in such an environment. Many wealth managers will point to the paragraphs above and nod sagely that years like this come along from time to time and you just have to grin and bear it.
However, this is not the case. It does not have to be like this. At the time of writing, ALL our clients who have been invested with Rutherford Hughes Limited since the beginning of the year are well ahead, many even with double digit returns! How is it that a small wealth manager and IFA in the North East can produce such outstanding returns? The answer is that our process is well thought out, is not UK centric and uses active managers, rather than track an index. Index trackers are cheap but reflect the composition of the index. Here in the UK that means that you have significant exposure to oil companies, banks and airlines. Precisely where you do not want your money in the current climate.
We are not just one-year wonders. Our pure equity portfolio would have about doubled your money over the last five years. Our more defensive portfolios have, naturally, produced lower but still excellent returns.
There are some caveats to add. Specifically, I must remind you that past performance is not a guide to future performance and the value of investments can fall as well as rise. A good example is 2018 when the last few months of the year wiped out the gains made earlier. However, the key to successful investing is holding on for the longer term. Also maintaining the ability to recover from equity market falls is essential. Multi-asset, absolute return and property funds will not provide this. Keep calm when others are panicking. It is often a buying opportunity. Next, you should ensure that your investments are as tax efficient as possible, whether that be pension or ISA or other tax wrapper. Finally, may I wish everyone a Merry Christmas and a happy and healthy New Year. I will keep my fingers crossed for 2021
