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Q. We invested €42,000 in a Managed Fund in 2007. It dropped considerably in value following the 2008 financial crisis and market crash but had recovered well up until July this year. We do not need to use this money for the foreseeable future, probably another 3 or 4 years but are concerned that we might suffer the same losses again. What would you advise ?
A. Firstly, we cannot predict the future when it comes to investment returns, particularly in the short term. Managed funds invest in a combination of equities (shares), government and corporate bonds, property and cash with the largest proportion invested in shares. Typically a medium risk managed fund will have between 50%-75% invested in shares so a fall in equity markets will usually result in a drop in value in a Managed Fund. This being the case, equity markets have been volatile since May/June this year and experienced a significant fall in August. There are a number of factors which caused this, principally the unexpected devaluation of the Chinese renminbi which led to speculation about the extent of the economic slowdown in China. This in turn generated worries over the prospects for the global economy, in particular the potential effect on prices of commodities such as iron ore and coal and falling demand for these. At present equities have recovered some of this ground but most analysts believe that they are likely to remain volatile in the short term. On the positive side equity markets generally have risen significantly since 2009. One of the positive effects of a market correction is that it brings value back into equities and for medium term investors, may provide an opportunity.
Looking at your existing Managed Fund – if your circumstances and objectives remain the same and you are likely to keep your money invested for another 3 or 4 years, then, in general, we wouldn’t recommend encashing or switching out of equity based funds. However it would be important to ensure that your investment portfolio is correctly aligned with your personal risk tolerance. While managed funds were a popular choice for investors in the past, there are now a number of alternatives available which aim to deliver similar type returns using a more diversified and lower risk approach.
Given your experience in 2008 and your current concerns we would advise meeting with an independent financial adviser such as Money Plus to review your risk profile to see that it is compatible with your existing investment fund or whether you would be more comfortable with an investment strategy which is more risk controlled.
In this regard Belinda McCauley of Money Plus would be delighted to assist you. Belinda’s contact details are : 086-7847827/071-9194000 or email: [email protected]
MoneyPlus are experienced investment and financial brokers and have been in the business of financial and investment planning for many years. They are dedicated in providing bespoke financial planning advice to clients. If you would like further advice on the above or any other financial information please contact Belinda McCauley in our Boyle office on Bridge Street on 071 9194000 or [email protected]
Boyletoday.com/MoneyPlus accept no responsibility for any decisions taken as a result of advice provided in this column. A reliable recommendation can only be made following a full detailed consultation taking an individual particular circumstances into consideration