Controlling Investment Risk

  • by Graham Bond
  • 03 May, 2017

Making the most of investment market volatility

Controlling Investment Risk

In the light of recent market volatility, it's perhaps natural to be looking for ways to smooth out your portfolio's returns going forward.

In a fluctuating market, investing regularly – a strategy known as 'pound-cost averaging' – can help smooth out the effect of market changes on the value of your investment and is one way to achieve some peace of mind.

Increasing the long-term value
This simple, time-tested method for controlling risk over time enables you, as an investor, to take advantage of stock market corrections. By using pound-cost averaging, you could increase the long-term value of your investments. There are, however, no guarantees that the return will be greater than a lump sum investment and it requires discipline not to cancel or suspend regular Direct Debit payments if markets continue to head downwards.

Investing money in equal amounts
The basic idea behind pound-cost averaging is straightforward – the term simply refers to investing money in equal amounts at regular intervals. One way to do this is with a lump sum that you'd prefer to invest gradually – for example, by taking £50,000 and investing £5,000 each month for ten months.

Alternatively, you could pound-cost average on an open-ended basis by investing, say, £1,000 every month. This principle means that you invest no matter what the market is doing. Pound-cost averaging can help investors limit losses, while also instilling a sense of investment discipline and ensuring that you're buying at ever-lower prices in down markets.

Taking advantage of market down days
Investment professionals often say that the secret of good portfolio management is a simple one: market timing. Namely, to buy more on the days when the market goes down and to sell on the days when the market rises.

As an individual investor, you may find it more difficult to make money through market timing. But you could take advantage of market down days if you save regularly, by using pound-cost averaging.

Committing to making regular contributions
Regular savings and investment schemes can be an effective way to benefit from pound-cost averaging and they instil a savings habit by committing you to making regular monthly contributions. They are especially useful for small investors who want to put away a little each month.
Investors with an established portfolio might also use this type of savings vehicle to build exposure a little at a time to higher-risk areas of a particular market.

Averaging out the price you pay for market volatility
The same strategy can be used by lump sum investors too. Most fund management companies will give you the option of drip-feeding your lump sum investment into funds in regular amounts. By effectively 'spreading' your investment by making smaller contributions on a regular basis, you could help to average out the price you pay for market volatility.

Giving your savings a valuable boost
Any costs involved in making the regular investments will reduce the benefits of pound-cost averaging (depending on the size of the charge relative to the size of the investment and the frequency of investing). As the years go by, it is likely that you will be able to increase the amount you invest each month, which would give your savings a valuable boost. ν

Levels and bases of and reliefs from taxation are subject to legislative change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested.

Recent Posts

by Graham Bond 05 Jul, 2017

Time and time again forecaster try to predict what will happen in the future to Stock Markets. In reality, nobody knows what Markets will do next.

The Wall Street Journal in the US recently published an article about the performance of Global Stocks and Shares. The article was called, “ Global Stocks Post Strongest First Half in Years, Worrying Investors .”

“The question for stocks and shares investors is whether the strong first six months of 2017 heralds a choppier second half or the start of a multiyear upswing. The data on global rallies offers a mixed record.”

In plain English, this means:

 “It’s impossible to predict whether markets will go up or down for the latter half of the year. Markets could go up or down or even trade sideways.”

The newspaper article also reported that: “Most of the major stock Market Indexes, 26 in total have risen in value so far in 2017. The last time this happened was in 2009.

by Graham Bond 29 Jun, 2017
Here's an update on Personal Finance Portal. From the 4th July our client portal will have a new look and feel about it. 
The software provider we work in conjuction with have revised the format to make it easier to use for our financial planning clients.

The Personal Finance Portal is a quick and secure way to obtain up to date valuations on your pensions and investments. It also offers you a way to communicate safely with us as the service is encrypted. The same cannot be said about email, which is not secure. 

The aim is to make the navigation easier to use and to provide more information to you on your finances. 

The video below shows some of the improvements that will be made. We hope you find it useful and informative. 

To access our portal please click this link

If you would like to find out more about the Personal Finance Portal please feel free to contact  us on 01454 321511. Consilium Asset Management offer Independent Financial Advice to private and business owners in the Bristol area. 
by Graham Bond 21 Jun, 2017

Over the month weeks and months, we are looking to improve the personal finance portal (PFP) for our clients. The first stage is to introduce a live chat, audio and video service whilst clients are logged into PFP. This is the first level of improvements we will be making over the coming months. The live chat service is safe and secure.

More posts
Share by: