Tuesday, 30 August 2011

Cruel summer

April is said to be the cruellest month, but August certainly seems to have run it close this year.  A crisis in the Eurozone and political stalemate in the United States got the month off to a poor start and we seem to have ended August with the threat of a hurricane in New York, a further outbreak of avian flu in Asia, famine in Africa and war in Libya.  The four horseman of the apocalypse seem to have had a busy time of it lately.  Moreover, it certainly appears that the recent volatility will be with us for a while yet.

But does this matter?  Well, of course the answer is 'yes' in the short term as sharp fluctuations in market values can be very unsettling for people.  However, the key is one’s investment time frame. After all, the value of a portfolio of investments is important at the time at which one needs it.  Provided that you have sufficient capital for emergencies, short term fluctuations in capital values become just that – fluctuations in the short term. Indeed, months like August in which a broad swathe of blue chip equities have been relatively indiscriminately marked down can create attractive long term opportunities.  I don’t think for a moment that anyone is suggesting that these big, market leaders are going to disappear and, current economic uncertainties notwithstanding, should continue to offer some attractions to the longer term investor as part of a well balanced portfolio.


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