How to handle choppy markets

We think women need to talk more openly about money. Be embarrassing or confusing. Join the conversation. We'll be discussing a whole range. Hello and welcome to another AJ Bell Money Matters episode where we try and tackle some of the money issues affecting all of you, particularly focusing on women. But then hopefully you know that.

Uh you might also know that I am normally joined by Laura, but she is off enjoying her cash, one of her New Year's resolutions, and that is one I can totally get behind. So I am joined by Charlene. Hey Charlene. Hi Danny, hi everyone. It is an absolutely brilliant resolution from Laura. I can totally get behind that because, you know, much of what we talk about on this pod is about being disciplined, planning, taking steps to make our money work hard.

kinda the boring stuff, but ultimately that's all about giving us choices, right? Absolutely. I'm r all for this too. I mean, not only I because I get to join you on the show today, but we spend, like you say, an awful lot of our time Talking about money, financial goals, but it's easy to do a lot of that talking but not actually live out that life ourselves. So very much sort of do as I say, not as I do. So

Yeah, I've I've made up uh made sure I put aside some cash for my pension contribution at the end of tax year end. Go me. Uh, but I am also in the process of getting someone in well, I've actually signed her up, um, to come and redesign our garden. We've got such a nice space, but we are so lucky. Where we are, but right now it spends most of its time marked out as of the all pitch because I have two young boys age nine and six.

So, you know, I'm paying for this garden redesign, so I am getting the biggest say in what we get. Danny, what about you? Now I feel like um my purchase is you know it pales into comparison'cause I've bought some garden furniture, but it's just literally gonna go over there um in the garden where I'm looking now. But there's no no redesign involved. Yeah, but garden furniture, I mean it's not cheap either. So you've got to pick the right thing. It's like it's very, very important.

Yeah, but you know that much of life really is about taking the rough with the smooth and with investing, it's something that... can feel overwhelming. You know, when markets are going up and down like a roller coaster, and that is definitely something that we have experienced this year, uh, and in fact last year, and in fact during COVID. Um it feels like we've been talking about this a lot where, you know, we've had headlines, billions wiped off the value of global stock market.

And then I don't know about you, Charlene, but I look at my own investments, I look at the value, my ISIS pension, and and I notice that it's fallen. Um, but it's really important not to panic and Yeah, absolutely. I mean, that's why we always talk about something called diversification when it comes to investing. So

you know, not having all those eggs in one basket preparing your investments to weather any storms. And actually, you know, you might have seen this if you've been checking a bit too often, but Things things have recovered in certain areas. So, you know, when you might have been seeing falls and focusing on that, let's remember that by kind of preparing our investments.

It allows our money to grow when the sun is shining, and as I say that the sun has just come out here. So, you know, most things need a bit of rain to grow. We've got to take a little bit of the rough with the smooth, I think I agree. Yeah, and um it's It's interesting and I know we're gonna get into this a bit more with our guests, but um I'm

always asked by journalists, talk on the radio and the tele and in newspapers and I'm always asked to comment when things are particularly bad. Yeah. And yet when things do well, then it it people are not so interested in that. And I think that this is something that, you know, we're kind of guilty of um in the UK. Not really.

shouting about when things are doing brilliantly, when, you know, the money that we've set aside does allow us to get someone in to to design our garden. And I'm really jealous Oh sorry, it sounds so bougie now that um you say it back. But you know, it I'm kinda proud, like I saved this money up and I wanted it to be used for something pretty big impact. So um

Yeah, I I'm a bit fed up of having footballs pelted at me from a certain direction, so they're gonna they're gonna go towards the back. So yeah, I think, you know, like you mentioned, we get our An awful lot to talk about certain things. And yeah, one thing that stuck out for me was getting asked early on in the conflict to talk about.

the oil price shock and what impact that would have on people's investments, mainly their pensions. Um really important, but you know, w there's a lot of chat obviously quite rightly about energy shocks, food prices, what might happen to that. But investment markets, we'll go back to that. It's been choppy, but generally speaking, you know, and times in the past when we've seen things go down.

They do bounce back. They do. I mean, it it's great for people that stay the course and didn't panic. But yeah, we don't shite about that. It's very um it's very unbrishish, wouldn't it? We we love the good negative, but maybe Maybe we should talk a bit more about when things are good and things are recovering.

Yeah, and this pod is about three Ps. Well, actually four P's. Patience, perspective, and preparation and pan. But we absolutely do not want to panic. The first three of those are all very important. And I'm delighted that our guest this week knows all about the importance of all of those things. P's. Georgina Britton is a fund manager at JP Morgan. To give her her full title, she is manager of the JP Morgan UK Small Cap Growth and Income Trust. So

She is pretty perfectly placed to talk us through all of these things. Hi, Georgina. Hi Danny. Let's start with the negative headlines then, because they can be pretty disturbing at times. The market falls, that then impacts on our investments, and it is hard not to panic. Yeah. Completely true. Completely true. So what do I say to that? Um I think

I should first of all um just point out um to those listening, anyone listening, um, I mean I have been doing this job for an extremely long time. I mean extremely long, probably longer than some of the listeners have been alive.

So um I've seen the good and I really have seen the good and and enjoyed enjoy the good, but I've also seen the bad. Um I mean that obviously Here and now uh we're you know, we're talking about um the Gulf But more recent uh very recently still in my terms with COVID, so obviously um very traumatic for all of us and very traumatic uh economically and for the market.

I was managing money through the global financial crisis and even in the dot com boom and bust. So I've seen many, many of these. The absolutely Key message that I would get across, if you're ever going to panic, you have to panic early. You needed to panic about COVID, you know, in November, not in March. You have to really, really think about these things beforehand.

When everyone's panicking and when markets are falling, it is far too late. And that just that that rule has been has been borne out so many times. In actual fact, so if we if we go back to to COVID, where there were enormous stock market moves, um, for understandable reasons, you know, we'd we none of us had ever seen the like and you know, basically the lights were switched off everywhere and we were stuck in our homes.

Really truly, we stuck our necks out, I stuck my neck out, we looked at the world and we said, We've no idea what this is, how long it goes on for, but do we think the future looks pretty much like the past? And we decided yes. And so we started buying the things that everyone was selling, the things that had really, really fallen. So for example, and th in those days we were buying airlines.

Yeah, you couldn't fly. You literally couldn't get on a you couldn't buy a ticket. And we were buying airlines, we were buying holiday companies because we said, guess what?

The very first thing people are gonna want to do when the world gets back to normal is go on holiday again, get on a plane, leave this country'cause we'll be a bit bored of it by then. All that kind of stuff. So, um sorry, that's a that's a very long answer, but but you're really truly If you if when everyone is panicking, you're far too late.

And I think that thank you, Georgia. I think that's a really, really interesting point because we talk about these negative headlines and market fluctuations. Like you say in COVID it was unprecedented. We didn't really know what was gonna happen, but Those market fluctuations, as you said, when it comes to things like airlines, they could have been your friend from an investment point of view, because buying during those market falls can actually be a huge benefit to investors, can't it?

Uh it definitely can. Although I will to be very honest about it, it's extremely, extremely uncomfortable at the time. I mean, honestly, I used to wake up at night thinking, What have I just done? Why have I put, you know, my investors' money? Why have I bought more holiday companies? Yeah, I it Those decisions with hindsight are so obvious, but they're difficult at the time. They're very difficult.

Yeah, it's about that investing journey, isn't it? And you know, we talk a lot about markets going up and down, but actually really how you feel as someone investing, whether you're investing your own money or you're investing other people's money as you do. Yeah, it's really about kind of knowing what how you might react to that journey and those ups and downs. Definitely.

And I I think one thing that I always find is that tech is absolutely brilliant because it does mean that we can easily keep track of all of our investments. Um but As I've got closer to retirement, I've become incredibly naughty and I do tend to look at my pension all the time, which means that I am watching every fall. And those are the things that I notice. I don't tend to have the same emotional reaction when my money is growing. And

When you want to take action as you say, that sometimes is when you just need to be patient. If you're not feeling that you can make those moves to to buy things that other people are selling, maybe just be patient. I I couldn't agree more. So um as a market professional, obviously I literally do what

all stocks all day, every day. That that's what I'm paid to do. Um but uh obviously I have my own personal hassle as my personal investing and for for anyone who who's outside I would really emphasize that that, you know, it's lovely to have all this tech and have it all at your fingertips.

Don't watch it like I do. Absolutely don't. You should not in any way be checking. You shouldn't you sh definitely shouldn't even check once a week, let alone once a day, possibly once a month. You know, these are long term decisions. That's the point about investing. The time horizon is a lot. But if you have looked at

How do you then control that panic? Because w we do want people to be engaged with their investments, of course we do, but we want to help them avoid making knee-jerk decisions. So how do you Take that deep breath. Give yourself permission to go, it's gonna be okay.

Okay, now that's uh that's an interesting question. I'm gonna um just stand back for a moment and um And uh let your listeners know I thought this was fascinating. Um and I used to have it stuck at my desk at work for all my male colleagues to look at. But there there have been more than there've been several pieces of work which suggest that professional investors like myself Um, professional female investors are actually better than the men, and they're better because they're less emotional.

So I love that in so many ways. Obviously I love it because we're the best. And I love it because obviously being told b telling the men that we're less emotional. But it is crucial to as I say, it doesn't matter w whether we're talking about personal investment or or or or my mine at um at work.

Of course you're going to be emotional. I'm emotional. I walk in on a day, a company's gone wrong, shares are off, you know, it's it's very unpleasant. And obviously your own money, you're looking at it going, Oh my god, I've lost whatever, five percent today. So don't be surprised by that. You go, oh, ow, oh, whatever. And then you put it to the side. You put it to the side and you say, right now.

Do I actually want to buy more? Has anything changed? You know, really allow the emotions to come out because you're gonna, you know, it's lying if you say you you're not emotional about all of this, but but literally then park it, right? Okay, done that. Hopefully not cried, but you know, had the had the had the mental tears and and then now. Yeah.

I think you mentioned emotions and you know emotions are are down as well as ups and we've talked about market wobbles and what we've seen in the last few years but And you know, as as Danny mentioned, when when she's checking her pension on her app or online too often, I'm I'm gonna have a word with you about that one. But you know, we are

we are feedback animals and I think, you know, we do focus on the bad rather than the good. How do we make sure we're reappreciating the good times when markets might be looking a lot more resilient or bouncing back? How how do we do that? Maybe obviously keep our emotions in check then as well?

Well, uh definitely it is it is both ways. So I think um and uh and uh probably for a lot of people I was kind of exaggerating, but you know, if you're really only um looking at, for example, um For example, uh Danny, your pension once a month, you know you just go oh Yeah. It's gone up, literally. As you say, it's so interesting as humans, yeah. we do focus on the negative a lot more and allow yourself a very big smile. You know, oh good, yeah, my pension pot went up last month. Um

Exactly, and we were talking about the P's earlier. Again, we'll go back to preparation. Um, you know, we mentioned earlier in the episode before we had you on a guess that we we often hear financial professionals and talk about diversified portfolios, which

Which you know, for listeners in plain English, is having a mix of investments that work in different ways. So you're not having all your eggs in one basket, so to speak. Um, could you explain a little bit more about sort of diversification and why it's so important? Um absolutely. So um

One of the funds I run, as you mentioned, the JP Morgan UK Smaller Companies um Growth and Income Investment Trust. So we call it Juggy to for a nice short one. Um, that um and a lot of other funds will be similar. We have something like eighty holdings in On any one day, something somewhere, one of those eighty is not going to be having a good day. That's just how markets work.

Um that is the beauty of a diversification, put very, very simply. You've got eighty different stocks, different companies, forget that they call it I'm calling them stocks, but the underlying they are companies. And some are having good days, some are having great days, some are not. Some are delivering exactly what the market looked for, some better, some worse.

Well I mean really truly kind of the d diversification is that simple. However, uh um for the for your listeners, obviously if you invest in in something like an investment trust or a fund Even if you've only got the one within that fund, you know, is the diversification. So in if you know if you're investing, for example, you wanted some UK exposure to my my smaller end, lower end of the market, you know, I'm doing the idea of diversification for you.

It's kind of as simple as that. So I'll just sorry, just to just to add to that, um, I mean, you know, right now, um uh as as we speak, you know, very sadly, um there is a there is a um war in the Gulf. I can tell you that um this is where uh someone in as I sit at my desk, I see the benefits of diversify in every every day. And you know.

Trump says something positive, which means we all think the war's gonna end, certain stocks will go up, um, oil will go down, so any oil related stocks I have, I've got some oil gas exposure. They will go down. Um, your UK domestics will start to go up'cause we think the great war is over. Literally the next day he says something else and exactly the opposite happens. I am literally watching diversification in action over this last few weeks.

I I do sometimes feel that somebody really needs to take his um social media away from him'cause I wake up at five o'clock in the morning and the first thing I do is figure out f what has Trump said and what is the oil price doing. So it it is so I'm gonna use the word volatile at the moment, but um, you know, I I probably get told off by Laura for using jargon but

Chopping choppy. Yes. See I like that. Yes. Um but Georgina you obviously focus on UK companies. There's been a lot of um Really people downplaying the UK's economic uh outlook, but how might they fit into someone's wider portfolio and what's the benefit? Okay, that is a great question and a very timely one.

So I'm gonna start off with actually I'm gonna start off with um what's been happening in Europe, which may surprise you because everyone sort of turns and looks at America. But Europe was as out of favour, um I'm talking about the European markets obviously, um, as the UK.

Last year that switched. UK Uh UK main market, so the FTSE 100, our largest 100 companies, you know, did much better, but Europe did even more strongly, and a lot of money flowed out of out of um out of the states and into Europe. UK, we think is behind that, uh behind the curve on that, and that's sort of the next stage for.

Because a lot of this, so the kind of the two things that really move markets in general, one of course is the companies themselves. They've got to be doing well in order for share prices to go up and more people taught to buy them. But the second thing and and and this um uh is is probably less obvious to um to private investors, but you know, behind all of this are enormous, ginormous money flow.

And over the last 20 odd years, you know, the US was it. Um, and the US been a very successful economy, lots of reasons, and some obviously some amazing companies. Um, and a lot of money came out of Europe and the UK and piled into the state. In addition, in the UK, our pension our pensions, which used to be used to hold circa 50% of their assets in UK companies, now I believe, no one's quite sure of the number, I think they own three to four percent.

So if you come down from fifty percent to three to four percent, that is a massive amount of outflows, by which I mean selling of UK stocks in order to get the cash to buy US. We think the time has come and we as I say we started to see it in Europe in your in particular that those Um, flows of money will reverse. When you try and put that kind of money back into markets, guess what? And back into the UK market, guess what? The market will go up.

The other key point that I have to mention, because this is the start and end of investing, is valuation. And because of all those outflows, the UK is Cheap. Um, it really, really is undervalued. It's undervalued versus Europe and it's hugely undervalued versus the US. And guess what? The best advice I can give anybody in any terms of investing is. Buy cheap, sell expensive. That's how.

It's really interesting to hear you talk about this because people who are maybe starting their investing journey or that they're they're relatively new to it. They perhaps aren't sort of looking beyond a fund. They're not thinking about the individual companies behind it or what's going on in in different economies. So it it's great to hear you sort of give a bit of um

I don't know, a bit of a wrapper on things for people. Um time I wanted to talk about,'cause we've spoken about the three P's and obviously patience is in there, but It depends very much on your time horizon, on when you want your investments to to pay for something. So if you're in your twenties and you are thinking about your pension

You've got a long time for investments to go up and down. But similarly, if you're in your twenties and you're saving up for a house deposit, and you want to do that in five years time, then that is a very different conversation you need to have with yourself and a very different sort of thought process when you're picking investments. Uh no, I absolutely couldn't agree with you more. Um, I think it's crucial. So um

It so in terms of pension, pension is the is the easier one, especially if you're twenty five. Um twenty you you have well, who knows how long everyone's gonna work nowadays, but you know, forty plus plus plus. Now I think I think this is apocryphal, but I think it's also said that it was Einstein who said that compound interest is the eighth wonder of the world. And I suggest people go Google that because it really is something and if you're compounding Over 40 years. Yeah, it's all about

It's all about time horizons, all about how long it is. I I I literally is so powerful and I can't put it in simple words here and now. So honestly, just go and Google and there's a whole there's great explanations because I actually just did this um before I talked to you today. Absolutely right. If you are saving money for your deposit for your house

your time horizon is completely different and therefore your risk horizon is is completely different. And I and all I could do is is is emphasize that, you know, you need to know why you're investing, you know, the purpose and and the time horizon. And you know, make Two pots, three pots, if you if you possibly can if you're fortunate enough to. You know, this one is is, you know, a longer term one. I can take more risks.

Um, and definitely if if for example it's the house deposit, a crucial crucial one for one of your um you know, one of life's most important moves, then then really dial down the risk. It is it is that simple. There's no way around it. Yeah, thank you. I'm just gonna pick up on that word risk because I think those of us that work in finance.

You know, we know, um talking to our listeners and our readers, women in particular are put off from investing because of risk or because of what that word perhaps means to them. But

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Yeah, in in my world, in the kind of jargon that we speak, we talk about risks, but we talk about risk we talk about risk but together with returns. Yeah. You don't get returns without taking a risk. True in all our lives of anything you do where you stick your neck out slightly, you're doing it for a reason and there's a slight risk and sense um uh using that expression.

Um that's how we look at it. In order, you know, as a professional, as um as you said, in order to make the returns um that I want to make for my investors, I have to take risks. Point is you want to take Know the risks you're taking and take calculating this. So it's the Um, it's the other risk that you want to avoid. So I th I think, you know, you should I I would suggest you have to look at the two hand in hand. So

i if you you know you really don't like risk, well you're probably not going to get any returns. If you start thinking about it that way round, you'll change your mind about a little bit of risk. Obviously not excessive risk, but a small

Thank you. Oh Jardina, thank you so much for coming on the show today and talking to us. It's been great. Absolute pleasure. And before you go, we always ask all of our podcast guests for a financial confession or financial dilemma that they have personally experienced. Does anything spring to mind?

Yes. Um it's actually it's a confession, not a dilemma, and and it's actually um it is completely true, but also given what we've been talking about, um part of uh part of what we've been talking about today, it's very um spot on. When I look at my personal investments, um, including my pension, but in particular the ones outside the pension, I am

Hugely overweight the UK. I mean hugely overweight, uh, which is what um uh what very few people in the world can say nowadays. And I'm an expert on these companies and I think I know them and I've chosen to put my money. I think Jennifer that's a confession or a boast. Hopefully it'll be a boast one day, but at the moment it's a confession. I think you'll be getting some bonus points from the Chancellor with that answer. Back in British.

Ah, thanks Georgina. Now that's all for this episode of the Money Matters Podcast. I'm delighted to say that I will be back for the next pod when we will be talking all about our new research into the gender pensions. Yes, the gap between the cash that men and women have when they retire is one of the things that kicked off this whole AJ Bell Money Matters campaign. So do join us next time when we will explore what has changed.

what hasn't and what needs to be done to help more women feel good investing. Do get in touch with any comments or questions. You can find us on social media, Instagram, Facebook and LinkedIn at AJ Bell Money Matters. You can sign up to our newsletter via our Women and Investing Hub, which is where you'll also find loads of great content to help you with wherever you are on your investing journey. Until next time, thank you so much for listening. Before you go, please remember this.

is for educational purposes. And the views expressed not necessarily reflect those of AJ Bell. The podcast isn't telling you if a certain investment is suitable. Don't forget that the value of investments And you can lose money as well as make it. It's also important to remember that how you're taxed will depend on your individual services. And rules can change. it behaves in the future. If you want help, go see a qualified financial