Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

Last Wednesday, we held our first Wealth Management Investor Forum of 2024, presented by Mervin Taylor, wealth relationship manager, with expertise from Tom Stevenson, investment director and Sabrina Tambini, wealth advisor. 

The forum kicked off with an insightful presentation by Sabrina which explored how investors can look at tax-efficient ways of saving.

Following this, Tom covered the key themes on investors’ minds and what he thinks 2024 could bring. Like last year, interest rates continue to remain front and centre. 

Fidelity customers were particularly curious about the role cash can play in a portfolio. That's not surprising, given this this 'higher for longer' rate environment, has boosted the interest on cash. Cash funds have seen massive inflows in the past year but as interest rates begin to fall, this could all change. 

Another question explored the case for active versus passive investment strategies. One customer mentioned the appeal of tracker funds, given their low-cost and their straight forward approach, over actively managed funds. But as Sabrina mentions below, actively managed funds come with benefits too. 

Tom also touched on his latest Investment Outlook and his fund picks for 2024 - two great resources that provide market insights, as well as investing ideas on key asset classes and geographical regions in the year ahead. 

After this, Tom and Sabrina took questions from our audience. There were several questions submitted online, as well many hands up in the room. 

Here are three questions you asked our experts:

1. What is the opportunity or risk of disinvesting into cash? 

Tom said that the main risk of being in cash is that over the long run, it's not a great home for your money. 

“As an investor you get rewarded for taking risk. The only risk with cash is an inflation risk. That means your money may become less valuable in real inflation adjusting purchasing power terms, over the years.” 

Although cash can broadly keep up with inflation, if you want to create a better return for yourself over time, you need to take more risk. Think bonds and equities. 

Tom highlights that it’s important to understand what risk is because this is not same as volatility.  

“Volatility is things moving up and down. Risk is the possibility that you experience a permanent loss of capital. And actually if you’re investing for long enough, historically, shares have not been risky. They’ve been volatile, but they’ve not been risky. The main danger of hiding within the safety of cash is that you don’t expose yourself to that greater long-term return,” said Tom.  

From a wealth adviser’s perspective, Sabrina said that you should absolutely have a little bit in cash but the amount you hold is dependent on your objectives.

And while you can get a decent rate on cash these days, interest rates are expected to fall soon. 

“You might get your 1 or 2-year fixed of good interest rates as we’ve seen, but we are expecting interest rates to come down. By that point, markets are more likely to be expensive.” 

Tom also mentions that at some point, you will have to reinvest.  

“You actually have to make two decisions. You must make the decision to get out the market. You then must make the decision to get back in the market. And inevitably what you do is you don’t get back in the market in time because you wait, and you wait, and you wait. You wait for the best opportunity and suddenly, you find that the market has risen by 30%.” 

Our Principles for good investing highlight why time in the market matters.

2. As someone who has been with Fidelity for the best part of 20 years, I’m increasingly leaning towards, tracker funds. The tracker funds also seem to be low cost but low hassle. But also, your Fidelity dividend fund - a terrific fund, I still can’t get my head around it, whereas I can get my head around the tracker funds so much easier. How do you feel as advisers and as fund managers, about tracker vs active funds these days?

Tom said that there has been a big shift away from active funds towards tracker funds, and for all the reasons that are mentioned above. They are low-cost and you can understand them but they do come with disadvantages.  

“There are disadvantages to tracker funds, I mean, especially if it’s a tracker fund which is market capitalisation weighted, it will be putting you by definition into the biggest and the stocks which have probably risen the most. So probably, the most expensive stocks, an active fund manager is, probably trying to do the opposite. They are probably trying to buy, the stocks which are the best value, that are the cheapest stocks. So, you look at what this tracker fund does (Legal & General Global Equity Index), it’s a very big bet on big US technology stocks which are very highly rated right now.” 

He added that there is a price that you pay for that security (investing in a tracker fund) and there’s a price that you pay for the simplicity and the low cost.  

Sabrina said a client's objectives is probably the most important part when you’re investing.

"When you are tracking the markets, you’re likely to see much more volatility. If you’re investing for thirty/forty years, there can be concerns about the drag of the cost of that investment in an active strategy versus passive. So, if you’re looking at the next five to ten years, how do you think the markets are going to perform? If you think it’s going to be volatile, again, it’s when you’ve got those investment professionals and their expertise. They can capitalise on those market opportunities, come and offer downside protection, reduce your exposure if we think something’s going to happen in the markets. That’s not going to happen in a passive strategy. So, if you’ve got a great band of experts, that active management can benefit you,” said Sabrina. 

Tom concluded by saying that passive doesn’t always equal low risk. Learn more about managing risk

3. How can I effectively manage the risk I’m taking in my portfolio, and secondary to that, what are some of the considerations to be aware of?

Sabrina said that risk is an important factor to consider when you’re investing.  

“When you’re trying to assess the risk you’re taking, that’s quite difficult, if you don’t understand the risks involved of any underlying investments that you’re holding,” said Sabrina. 

“When you’re a Fidelity client, you have access to an X-ray report, which you receive quarterly. This can give you a good indicator of your asset allocation, as well as where you’re investing geographically. You can use this report to try and ascertain what kind of risk you’re taking.” 

“There are great articles online on the Fidelity website which will show you if your asset split looks like this, this is the kind of risk that you may be taking."

For example, if you're interested in 60/40 investing, will 2024 match 2023’s bumper year? touches on the risks of the traditional bonds/equities asset split. 

"If you do have a relationship manager, I’m sure they’ll happily discuss what risk you might be looking at. Alternatively, if you’re not sure, and you need advice, or you’re not quite comfortable in managing the risk in your own portfolio, that’s when the advisers can come in and help manage that for you.” 

If you're interested in our Wealth Management service, you can meet the relationship team at our Investor Centre in London, opposite Cannon Street station. To arrange a meeting call on 0800 222 456.

This service is designed for our customers who have over £250,000 invested with us and for users of our ongoing advice service (typically we help people with a minimum of £100,000 to invest).

Our Wealth Management Service gives you access to exclusive benefits, extra investment support and guidance to help you make the most of your wealth - now and in the future.

And finally, if you missed out the Wealth Management Investor Forum, watch the full recording below.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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