Like everyone, we have been stunned by the events in Ukraine. These are difficult and volatile times. In addition to the growing human cost and suffering, the escalating conflict in Ukraine and resulting sanctions on Russia add a new dimension of risk to investment markets. Wars do happen, but infrequently enough to assume the risk of one is slim in comparison to the alternatives. That we can move to the situation we are now in with such rapidity provides many lessons about what is important in investing and in life generally. We hope sense and peace will prevail.

Over time, markets will provide us many opportunities for us not to need to profit from current events. Our main responsibility is to keep a respectful watch over the investments we have made on behalf of our clients, which we continue to do.

The only risks which matter in investing are the ones we do not know about. Once a risk is known about it is, by definition, too late to respond as markets will have discounted it. Once this definition of risk is appropriately considered, the only logical conclusion is to not take excessive risk in the good times, to avoid a permanent loss of capital for investors when unforeseen events occur.

No one knows how the situation in Ukraine will evolve from here, and its short- and long-term consequences may well be profound economically and societally, but this need not mean where we choose to invest on your behalf will change. In many respects situations like the present reinforce, not disprove, the need to have exacting standards, both sustainably and financially, when making our investment recommendations.

Under such conditions, it can be hard to stay focused. But then no one can ever know for sure what lies around the next corner. In our experience, under these conditions the best strategy is to stay invested and stay diversified, so it is important to help clients maintain a long-term perspective and stick to the long-term strategy you have set together. As always, we are here to help guide clients through all market conditions.




It’s easy to feel bombarded by the constant cycle of negative news headlines or ‘noise’, which can add to your anxiety about how your investments are doing and uncertainty as to whether your investment strategy is on the right course. It’s important to try and block out this noise which could influence you to make hasty or erratic investment decisions.

Set and revisit your goals

Keeping a record of your reasons for investing can help temper any inclination to hastily change your plans. Revisiting your initial decisions allows you to assess whether your long-term priorities remain the same.

Avoid continuous monitoring

Our mobile phones allow us to keep completely up to date, which is obviously important for things like keeping in touch with family, but when it comes to investing, it’s best to avoid the temptation to set up alert notifications for funds or companies that you are invested in. Warren Buffett had this advice in 2016 after a period of extreme market volatility saying, “Don’t watch the market closely”; advice that still rings true today.

Time in the market

Shutting out the noise to concentrate on the long term, gives your investments a greater chance of yielding positive returns and benefiting from compounding, although there are obviously no guarantees.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.



As we find ourselves in unsettling times following the Coronavirus outbreak, BOE rate cut and ongoing market volatility, we wanted to highlight one of the key elements that an advisor must consider when managing a client’s portfolio, which is when and how frequently to rebalance back to target weights.

The key element of a diversified portfolio is the fact that asset prices move in different directions, especially when allocating between negatively correlated assets such as equities and bonds. This aspect of capital markets can help reduce the volatility of a portfolio that is broadly spread across asset classes. But following sharp market moves, as we have seen in recent weeks, this can lead to a misalignment between the desired allocation and reality.

Rebalancing, or selling a portfolio’s best performers to buy the worst performers periodically, is one of the best ways to protect against market movements altering a portfolio’s risk profile.

Morningstar research indicates that during the past two bear markets a buy-and-hold portfolio lost more than a rebalanced portfolio and the rebalanced portfolio recovered faster after it troughed. In addition, given what research has shown about investor behaviour, investors struggle to hold on during severe drawdowns. They often sell out of their declining equity positions for safer havens, locking in losses, extending the recovery period, and consequently hampering overall performance.

The experience of a buy-and-hold portfolio can be tumultuous, but rebalancing can help smooth out the ride. Daily, monthly, or even quarterly rebalancing may be an unrealistic expectation, but a combination of annual rebalancing and periodic reviews for large fluctuations, such as the recent 5% plus deviations, should be within the realm of possibility. Morningstar research shows that doing so will lead to better outcomes over the long term relative to buy-and-hold investors.

In summary, it’s tough to predict where the market is headed, but we can control our portfolio’s risk exposure through prudent rebalancing, and history suggests that will lead to better results for investors.



In recent times we have witnessed volatile markets which have dramatically impacted the values of investments. Uncertainties over global events such as the Coronavirus can cause markets to behave in an extremely volatile manner. Naturally, our first thoughts are with those impacted by this illness. However, we also understand that volatility in investment markets can be unsettling for our clients.

By way of a reminder, our investment process is always geared towards the medium to long term. Above all else, financial markets dislike uncertainty. Yet markets are also prone to over-react to events that cloud the short-term outlook, both on the upside and downside. When markets are volatile, it can be tempting to exit the market or switch to cash in an attempt to reduce further expected losses. However, it is impossible to time these movements with any degree of certainty, so not only would you be potentially crystallising a loss but being out of the market by just a few days can have a devastating impact on the overall returns of a portfolio once markets start to recover. Historically investments of this nature have over the medium to long term outperformed less volatile forms of investment, such as cash.



Key Takeaways

  • To build a robust portfolio, we believe 12-steps need to be agreed and practiced consistently.
  • This process helps take a complex operating system and simplifies it into actionable stages.
  • This is the structure that all portfolios overseen by Morningstar Investment Management follow, providing dependability of approach.

Investing is often about taking the complex and simplifying it into digestible and relevant chunks. If this can be done repeatedly, you’re well on your way to healthy risk-adjusted returns. With this in mind, we thought it would be useful to highlight why we decided on a 12-step process that can be consistently used for portfolio construction—including why this helps an investor to reach their goals.

To start, we must agree that building anything worthwhile requires three core pieces of knowledge. We’ve drawn a parallel with how one would select a sports team, but the same applies if building a house, building a ship or building a portfolio:
• Appreciate the rules—know the goal, including the parameters and any constraints.
• Rank the players—obtain a thorough understanding of each implementation option, accounting for both the expected reward and any associated risk.
• Select the team—take all available information, consider how each implementation option might work together and find the most appropriate overall solution.

Of course, we must highlight that this process is iterative. We never know how a given player will perform on a given day, nor whether a storm will hit, but if the framework is holistically followed it should produce results over the long term. Turning this into a specific investment framework, the 12-steps we believe are best placed to help investors are as follows:

1. Outlining investment objectives
2. Identify portfolio constraints
3. Determine portfolio construction rules
4. Identify investments available for inclusion
5. Understand reward versus risk
6. Assigning conviction levels
7. Ranking the opportunity set
8. Producing all feasible portfolio iterations
9. Development of portfolio quality characteristics
10. Identify the most attractive portfolio composition
11. Iterate portfolio sizing
12. Finalise portfolio allocations

Collectively, these steps allow us to deliver a clear investment process that increases the likelihood of reaching an investors’ goals.

Taking all of the above, we are finally in a position to select the most appropriate solution. This judgment-driven stage allows us to maximise the potential of the portfolio and account for the complexity of investment risk. To prepare investors for the future, the investment team use their expertise to construct robust investment solutions designed to perform well in different environments rather than being considered “optimal” based on expected results or a specific environment.

As a general rule, we avoid short-term forecasts based on one’s ability to predict specific environments. Instead, we aim to prepare for different environments through constructing portfolios that will hold up under many possible scenarios—even ones that we haven’t seen before. In effect, this involves trade-offs to deal with the probability and impact of negative outcomes.

This provides accountability and ultimately helps ensure the outcomes are in line with the best interests of an end-investor.

(We’re a well-established local firm of Independent Financial Advisers, covering Hampshire, Surrey and Sussex.

Our success is based on building strong, lasting relationships with our clients through a friendly, personalised and professional service (Chartered Financial Planner). Acting with integrity in everything we do, helping clients in making life’s big financial decisions, to provide them with peace of mind at every stage.

We provide genuinely independent Wealth Management and Financial Planning services, specialising in Investment Advice, Pension Reviews (including providing advice on Defined Benefit (DB)/Final Salary pension transfers & Commercial Property SIPPs), Investment/Pension Portfolio Management, Options at Retirement, Estate Preservation (Inheritance Tax Planning), Trusts and Funding Solutions for Long-Term Care.

Being independent means we can provide impartial and unbiased advice that you can trust, assessing the whole marketplace to find you the most beneficial and cost-effective solution. The best interests of our clients are at the heart of everything we do and our main focus is to help them in achieving their financial ambitions both now and in the future.)

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