A&M Wealth Management | This year we have been mostly taking profits!
16557
post-template-default,single,single-post,postid-16557,single-format-standard,qode-news-1.0.2,qode-quick-links-1.0,ajax_updown_fade,page_not_loaded,qode-page-loading-effect-enabled,,vertical_menu_enabled,vss_responsive_adv,vss_width_768,transparent_content,qode-child-theme-ver-1.0.0,qode-theme-ver-16.7,qode-theme-bridge,wpb-js-composer js-comp-ver-5.5.2,vc_responsive

This year we have been mostly taking profits!

This year we have been mostly taking profits!

The global financial crisis of 2008 caused considerable hardship and anxiety, but also created an attractive, long term buying opportunity. We took advantage of stock market volatility and our clients have benefitted from strong investment growth since 2009.

As pro active investment advisers, we seek to maximise returns, but also manage risk and reduce tax liabilities.

During the past year, our approach has been one of caution. With US and UK stock markets reaching unprecedented levels amidst a backdrop of economic uncertainty, we have been advising clients to take profits and increase cash reserves.

Recent stock market growth cannot be solely attributed to economic recovery, as company profits remain subdued in many sectors. The search for income has been a major factor in equity growth as investors switched out of cash and government bonds and into income yielding stocks. In other words, the momentum of new money has been as significant as economic fundamentals.

As pro active investment advisers, we seek to maximise returns, but also manage risk and reduce tax liabilities.

For some stock markets to justify their current levels, corporate profits will need to improve significantly, and fast! Another factor that could influence markets, is interest rates.  If interest rates begin to rise, as predicted in the US, so too will bond yields. This could result in investors moving out of equities and back into the “safer” haven of governments bonds.

A period of market volatility is likely in the near term and a more defensive strategy seems sensible. Should a correction in equity values occur, profits may be reinvested at more attractive valuations.

Profit taking is also tax efficient, as the annual capital gains tax exemption allowance can be utilised. Reducing tax liabilities can significantly enhance investment performance.   

For existing investors, it may be a good time to review your strategy and consider being a bit more defensive. For new investors it may be a good idea to delay equity investment until volatility returns.

Asset based investment is a long term strategy, however, taking an active approach can considerably boost returns.