The virus: a time to invest wisely for the long term and to take professional advice

How long will the coronavirus last, what impact will it have on the global economy and have we hit the bottom yet?

A message from Keith Littlewood at Blacktower Financial Management

As I write from my desk at home, it strikes me how quickly we are getting used to this new reality...

Since the last article we published we have witnessed some of the largest daily fluctuations in stock markets since the financial crisis, the latest being a jump in most indices of well over 10 per cent following the 2-trillion-dollar stimulus package agreed on by the US congress.

The volatility of the last few weeks comes on the back of continued concerns over the virus, how long it will last and its impact on the global economy. When discussing this with colleagues and clients, and when reading reports from fund managers and the financial press, the primary concern is the human dimension and the health of loved ones, but after that, of course, the shrinking of the economy and our clients’ interests are of paramount importance.

For new investors this can be an extremely worrying time as they will not have been used to such short-term volatility. For seasoned investors who went through the financial crisis of 2008, the technology bubble of 2000 and even black Monday in 1987, though, the short-term pain being witnessed at present can be seen as a confirmation that although stock markets can’t always go up, over the long term they have done so.

How long will we continue to see these jumps? It is generally assumed now that with this latest contraction a recession seems inevitable. Whether it will be a V-shaped one (i.e. with a quick, strong recovery) or a U-shaped one (where the bounce-back can take much longer), however, is a popular topic of discussion.

Some analysts say this contraction could prove the shortest ever, suggesting it could last no more than two quarters as opposed to the average of four quarters. As the cause of market stress is a public health crisis rather than a leverage or profitability crisis, fundamentals would improve when we have a peak and then a slowdown in Covid-19 daily infection rates in the US and Europe.

Have we hit the bottom yet?

Another question often raised is whether we have hit the bottom yet. At the moment we are still very much in an “over-reaction” phase, but the next two weeks will be critical to see the effects of the containment measures and to estimate the potential length of the economic contraction. Until then we can expect the high volatility to continue.

For long-term investors and fund managers alike, this offers new buying opportunities. However, markets are unpredictable, so it would be wise to spread your risk through diversification in a longer-term investment strategy, keeping a few core principles in mind:

1. Diversification – diversification – diversification: The best long-term portfolio is one that is diversified across asset classes such as stocks, bonds, cash and property as well as being spread geographically, not being solely reliant on one economy such as the UK or US.
2. Start investing early if you can: Compound interest can have an incredible effect on an investment portfolio.
3. Think twice before putting your money into cash. With low interest rates likely to stay with us for a long time, the eroding effect of inflation cannot be overstated.
4. Invest for the long term and stay invested: trying to time the markets is really only done by luck, missing the best up days can be as bad as enduring the worst down days
5. Always take professional financial advice: emotions can play a key part in an investor’s decision-making and a rash decision could have a negative impact on your portfolio. An adviser will review your portfolios and guide you through the investment cycles.

Please remain safe with your health and your wealth and contact us if you would like us to review of your portfolio or would like to look into the opportunities that undoubtedly lie ahead.

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Financial Advice Issues for Expats in Spain

I have been a Qualified Financial Adviser for almost 35 years now. 25 years in the UK for major institutions such as Natwest, RBS and Royal London. I have been in Spain giving expats financial advice now for 10 years and it is quite remarkable the different approaches as well as advice that is required for an expat now living in Spain.  Blacktower is a company that has specialised in providing the best solutions for its clients living outside the UK for 30 years also.

The currency issue is always high on the agenda and a discussion for the long term future has to be taken onto account.  Questions like What will happen if one partner dies? Will the other remain in Spain? What about other family members? What Inheritance tax provisions do you have in place? The list goes on and on.

Existing portfolio’s and investments that were the mainstay of portfolios in the UK may now be obsolete.  An example of this is quite often tax efficient products in the UK like ISA’s and previously held TESSA’s PEP’s actually have low growth rates and provide no tax advantage to a Spanish fiscal resident.

Existing Pension holdings either paid by the state or private pensions built up through working lifetimes are topics that have to be covered.  Many expats have lots of small pensions from many ex employers and can be confused by the communications and administration in dealing with them.  At Blacktower we specialise in advising on how to consolidate and bring all these pensions together in one place.

Bank accounts and investments in Spain always bring up lots of questions too.  Quite often the small print associated with financial products in Spain is in Spanish this can make it very difficult even if you have a good grasp of the language.  Understanding Jargon in English is sometime difficult enough.  I provide clear easy to understand letters and documents in English so that you fully understand any terms and conditions before making a decision.

Advice on tax efficiency is just as important and offering good returns.  There are products available exclusively for Spanish expats that can provide invaluable benefits.  Having a good base knowledge of the tax implications both now and in the future is an essential ingredient to making a sound decision.

I will complete a thorough factfind, ask you the right questions, establish your individual needs, attitude to risk and capacity for loss and desired returns before providing you with a full written report of advice and my recommendations in plain English.  You will then have time to read and consider all the information before contacting me with how you wish to proceed.

Click for more information about Keith Littlewood.

The above information was correct at the time of preparation and does not constitute investment advice and you should seek advice from a professional adviser before embarking on any financial planning activity.

Blacktower Financial Management (Int) Ltd is licensed in Gibraltar by the Financial Services Commission (FSC) and is registered with both the DGS and CNMV in Spain