FTSE plunges 4.6% on recession fears

Sharp falls in stock markets naturally make investors nervous and uncomfortable, but headlines like this don’t help, which is why Rule 5 of our PortfolioLogic investment process is:

... and don't allow news headlines to distract you.

The article continues ‘’it (the FTSE 100 index) fell 246.8 points, or 4.7pc, equating to a £64 billion drop in value’’, neglecting the obvious point that what is left must still be worth £1,327 billion and also neglecting the fact that there are other asset classes, notably UK Government Gilts that have increased in value, as worried investors sell equities 'low' and buy security 'high'. The track record of the two core gilt funds in our client portfolios is shown below.

Rule 5 also means that every quarter we review and re-balance client portfolios, taking profits where values have risen and buying where prices have fallen. As Mo always says ‘’When Russell and Bromley have a sale, they are the same shoes but cheaper, so buy two pairs not one’’.

Our Autumn re-balance is imminent, so if the market stays as it is we will be selling gilts and buying equities, logical and sensible which is probably why you don’t read about it in the papers!