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Decisions, Decisions - Latest advice from MPFS
"Sorry seems to be the hardest word - Bernie Taupin"
In the past months there have been numerous news articles and programmes about the credit crunch or will there or won’t there be a recession. Stuart Bell Chief Executive at Metropolitan Police Friendly Society (MPFS) reflects below whether it is now time to sell our investments or not.
No-one likes saying sorry. At home, we go to great lengths to avoid it! But at work, where teamwork matters, saying sorry is a chance to move on.
When it comes to investments, I find that “sell” is the hardest word. If you have money to invest, especially in shares, you can choose to bide your time and hold cash or to get on with it - it is not normally difficult to say, “buy”, and to live with the decision.
But if you want to sell, perhaps to spread your investments more widely, as we are doing at MPFS, the decision is more agonising. If markets are efficient, the price should correctly reflect prospects for future profits and losses - again, it points to a “get on with it” decision.
But markets are not efficient - for a start there is sentiment, and then there is usually an imbalance between those with money to invest and those who need to cash in. The current wobbles in the market point to the risk of hanging on - anything can happen. And the economy, especially in the US, tends to drive prices. The market has dropped as the US recession has become more and more evident. Other things being equal, it will pick up once there are signs that US growth will resume.
Again, at the time of writing, it all points to selling sooner rather than later. You might have done better to sell earlier - 20/20 hindsight abounds - but that is no reason to hang on. Fortunately, members invested in our with profits fund are spared these agonies. We try to provide steady growth by spreading our investments and “smoothing” returns – effectively averaging out the returns of recent years. Timing can still make a difference to those investing with us or cashing in, but it is nothing like as volatile as direct investments in shares.
Having just sold some equities, with an eye to re-investing in the summer, I will have to live with that decision. It was right to spread our investments more widely in current market conditions. If it turns out that I sold at the bottom of the market, I will be happy to say “sorry” – but I will not be apologising for taking a decision!
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