Investing in volatile times – with Paul Penny

The outbreak of COVID-19 is causing market volatility on a global scale with world indices falling sharply. We sit down with FDD’s Managing Director – Paul Penny, to get his thoughts on the current situation and take a look at investing in difficult times.

FDD Blog: Paul – it is clear we are entering rocky period for the markets, have you experienced a time like this before?

PP: Well, the couple of weeks have certainly seen the markets fall rapidly which is understandably going to cause concern for investors. However, there have been times where we have seen rapid market falls before for a variety of reasons. At the heart of this is usually uncertainty. Once the threat has been understood and contained markets are able to look forward and this allows the start of a recovery. If we look back to 1981 the market recovered after 41 days, although in most cases it takes longer than this. Perhaps the most relevant comparable situation was the threat from SARS. Once the virus was contained, markets bounced back strongly and quickly.

FDD Blog: How are you looking after your clients at the moment?

PP: We have put measures in place so that clients should notice minimal disruption to our service at the moment. We have implemented home working from next Monday (23rd March), with arrangements to deal with postal applications on a daily basis. Clients can call us on the usual number.  It may take slightly longer to answer calls, but if they leave a message we will call them back.

We have been speaking to Aegon, and are confident that there are sufficient measures in place for Aegon’s operations to continue as they are now. 

FDD Blog: Is there anything investors can do if they have concerns?

PP: My main message would be, if possible, to sit tight and don’t panic.

It’s worth remembering at times like these that investing is about the long term.  Trying to time the market is rarely successful. If you have a portfolio that has been set up to meet your needs, is well balanced and not over exposed to one region or asset class then in the long run you should be fine.

FDD Blog: Should investors be putting money in to the market given how far they have fallen?

PP: That’s a difficult question to answer.  In theory there will be plenty of buying opportunities but it would be a brave person to go all in whilst there is still such uncertainty.

One thing I would say though is that the tax benefits of an ISA are valuable and it does still make sense to secure them before the end of the tax year. If committing to the market right now doesn’t feel right then you can use the ISA cash facility. This will make sure you don’t miss out on this year’s allowance. The money can be invested at a later date, or be drip fed throughout the year if you are looking to try and ride out the current volatility. You can also move existing holdings into it too.

FDD Blog: What is the long term outlook for the economy?

PP: Without having a crystal ball to hand it is very hard to say. The government is committed to helping businesses through this unprecedented situation but it will inevitably cause some major economic issues for many sectors. Markets will not necessarily be calmed by short term announcements such as interest rate cuts. They will want to see more certainty about when life will be able to return to a more normal footing.

The Chancellor has stated that although the virus will have a significant effect on the economy, this will only be temporary and will rebound back to confidence once the crisis is over. He promised to do “Whatever it takes” to support the UK during this time and is confident the UK will emerge stronger.

FDD Blog: Any final words?

PP: As I said earlier, keep calm, sit tight and try not to look at your investments too much during this period unless you are looking to rebalance your portfolio.  No one can say with any certainty when the markets will hit the bottom, but we can say that they will recover over time.

This article is for information only and reflects the author’s views at the time of writing, which are subject to change. This should not be regarded as a recommendation or solicitation to invest. If you are in any doubt about the suitability of an investment for your needs, you should seek professional advice.