‘Market timing doesn’t work’: Guiding clients through market volatility

With practically endless investment options and constant bombardment of information on the internet where strangers offer their thoughts on what people should be doing, it is no wonder clients can feel overwhelmed when markets start to shift.

This, according to Centaur Financial Services chief executive Hugh Robertson, is where advisers can really help their clients, keeping them on track with their goals and avoid getting sucked into short-term market trends.

“When I look at investing, I’m a big believer in long-term principles. You know, we can’t invent new antiques. Principles are principles and they do withstand the test of time,” Robertson said on The ifa Show.

“So, you know, the hardest thing sometimes is ignoring the noise, and I feel it’s a really difficult position for clients to be in.”

A disciplined mindset proved even more essential following US President Donald Trump’s “Liberation Day” on 2 April that saw him introduce sweeping tariffs, leading to severe market upset.

“Really, the challenge here is that the US sharemarket is about 70 per cent of the global sharemarket now. So, if America sneezes, do we all catch a cold?” Robertson said.

As markets continue to rock, many clients may be tempted to jump on the trends and try to chase those high return anomalies. Unfortunately, Robertson explained, this often doesn’t work out how people might hope and can actually hurt their long-term plans.

“I suppose our investment philosophy, once we get down to it, is around preservation of capital, understanding that risk and return are related. A big one that we have is market timing doesn’t work,” he said.

“If you miss the 10 best days, the 20 best days, the 30 best, the 40 best days in the market, your return is diminished massively. So, part of that on the time in the market is just, you’ve got to ride it out. But to do that, you’ve got to understand why you’re there so that you can deal with the volatility.”

With the expectation that global market volatility is likely to continue over the next two to three years, Robertson emphasised the importance of ensuring client portfolios are adequately diversified to protect against future upset.

“The challenge is that you’ve got to be able to stick to your nerve when it’s not going your way and you’ve got to just diversify. So, you can’t just be in global stocks, Aussie stocks, cash, fixed interest, property, infrastructure. You’ve got to have a little bit of everything,” he said.

“Because, if you looked at gold, it’s done nothing for 50 years and all of a sudden it was the best performing asset class last year. So, you can’t say now I want to have 20 per cent of my portfolio in gold because you would only ever put in around 5 per cent as a max level holding. I think that’s the challenge.

“In times like now where we’re seeing lots of people get wealthy from bitcoin or whatever, people have a tendency to abandon their own strategy and then adopt someone else’s. But you don’t know that other person’s entry points, you don’t know what their situation is.

“So, that’s really a fool’s way to financial ruin – chasing someone else’s goals.”

A notable phenomenon in recent years has been the rise of “meme coins” on the market. Remarking on this, Robertson likened investing in these and other similar stocks to gambling.

“We talk about GameStop and these meme stocks, momentum trading, that’s all gambling. You know, let’s make sure we’re always drawing the line between speculating and investing,” he said.

“When we’re investing, the purpose really is we want to be in good quality assets that are going to increase their earnings per year.

“We’d like it if they’ve got a good brand that presents a bit of a moat around for us to give us some protection. We want a good management team in there. We don’t necessarily want cowboys in there.”

To hear more from Hugh Robertson, tune in here.