Happy New Investment Year

Welcome to the Purposeful Wealth Podcast.

Partial Transcript:

At the start of 2022 investors needed reminding that investing is not an easy game, despite having enjoyed around a decade of relatively strong – and fairly consistent - market returns, even in light of a global pandemic, recession, and political polarisation. The year 2022 laid bare the fact that investing can very much be a game of ‘three steps forward, one step back’. If there was no risk of market downside, it would be unreasonable to expect any return at all above cash. This podcast provides a brief look at the past 12 months, and highlights some of the lessons we can learn as investors. So let's look backwards For many investors, 2022 was a relatively tough year, with returns ranging from benign to poor, across most major asset classes...global developed, value companies being the exception. Rising prices made returns significantly worse on an after-inflation basis, with year-on-year inflation in the UK having reached levels not seen for decades. 2022 was particularly challenging for investors in bonds, as yields have risen (and thus prices have fallen) across much of the world. Bondholders with longer and lower quality debt suffered greater capital falls... ...whereas, shorter dated, high-quality bonds, as used in Wells Gibson portfolios, continue to be preferred. With few places to hide most investors will have finished the year in negative territory, which is to be expected from time to time. The magnitude of the falls, however, lie well within the tolerances of our client's financial plans. Investors with a reasonable amount of equity exposure should be able to withstand more material falls than those experienced last year - for instance, global equities fell by over 40% during the 2008 Financial Crisis. That said, those investors overweighting value companies and focusing on shorter-dated bonds will find themselves in better space than most, though this is little consolation when returns are still negative in an absolute sense. Investing is never a straight-line journey. Wells Gibson's sensible, systematic portfolios which comprise a diversified basket of equities – with tilts in favour of value and smaller companies - paired with short dated high-quality bonds - have provided better results than most other solutions in 2022. In fact, Wells Gibson's portfolios as whole, outperformed over 70% of professionally managed multi-asset funds over the 12 months due to these portfolio decisions. Investors, such as clients of Wells Gibson, with portfolios denominated in British Pounds, have benefited from the strong performance of the US dollar, which has meant overseas assets translate back to more in British Pound terms. In US Dollar terms (which is often reported by MSM), global equities fell around 18% in 2022, around 10% more than when viewed in British Pound terms. Some major US firms like Tesla and Meta may have hit the headlines with share price falls of over 70% and 60% respectively in the past year, however, they only represent a small allocation – and thus have a small impact - in Wells Gibson's well diversified portfolios.

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And why not visit us at: https://www.wellsgibson.uk/

And get a copy of the book, Purposeful Wealth here: https://www.amazon.co.uk/Purposeful-Wealth-Contentment-Certainty-Financial/dp/B08T42FNGM