Investing in uncertain times

We live in an increasingly unpredictable and changing world. Last year in particular was full of surprises and, as one fund manager pointed out recently, if you are participating in a pub quiz in 10 years’ time and are stuck for an answer, just shout out '2016’ and there will be a decent chance that you get the question right.

I stumbled across a great chart this week, courtesy of Goldman Sachs, which perfectly highlights the disquiet this has caused. The word “uncertainty” in news articles surged to record levels towards the end of 2016. I doubt the first month or so of 2017 has seen a decline.

Source: Bloomberg and GSAM, December 31, 2016.

Investments are not immune from the events that unfold around us – at least not in the short term – and investing during times of uncertainty can be very difficult.  There are generally two options: sit on cash or take the plunge and invest.

By sitting in cash you are effectively trying to time the market, which is basically impossible. If it wasn't, we'd all be rich and have retired a long time ago! You may be proved right and not lose money in a sell-off, but you could equally easily miss out on a rally. We saw this last year when many investors were holding cash, but the UK and US stock markets continued to rise, hitting all time highs.

My view is that if you are investing for the long term, don't worry too much about trying to get the timing right. At times of uncertainty, it's boring, but just make sure that you have a well-diversified portfolio. You can either do this yourself, or let a professional do it for you and opt for multi-asset fund. This may be a particularly attractive option for newer investors or those with a smaller pot of money.

By Darius McDermott, managing director, Chelsea

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius' views are his own and do not constitute financial advice.