Member Article

Emotions may be running high, but investors should keep a cool head

By Richard Clark and Simon Patterson, Assistant Vice Presidents at Barclays Wealth, Newcastle.

The market movements of late have been some of the most tumultuous we’ve witnessed since the onset of the economic crash in 2008. As we embark on writing our first Finance & Investments column here, we’re seeing that with equity markets oscillating, many investors are anxious about where they should now be putting their money.

Currently, we are seeing amongst clients that sentiment is still being dictated by fears of a US double-dip recession and the perception that the European sovereign debt crisis is creeping closer to the core of Europe. Naturally, these uncertain market movements tend to affect the way clients and investors view their investment strategies.

Emotional trading

Behavioural finance experts at Barclays Wealth often witness investors deserting their strategies in times of turmoil, which can result in selling when the market is at its lowest, and buying when it is at its highest. In fact, recent research carried out by Barclays Wealth has shown that this ‘emotional’ trading can cost investors nearly 20 per cent in returns over a ten year period.

For North East investors, the research found that emotional trading was particularly rife in this region. Half of investors in the North East said that they feel the need to trade often in order to make better returns, whilst 46 per cent of them admitted to having low composure and becoming stressed easily – which can prove to be prime conditions for emotional trading.

Understanding financial discipline

With this in mind, we advise our clients to keep calm in times of market fluctuation. Confidence is key for investors in following the tailored investment strategies set out by independent financial planners, and sometimes all that is needed is greater financial discipline. We have found local clients are responsive to this, and half of the North East investors polled in our research into behavioural finance craved more discipline with their finances. This is 16 per cent above the UK average, showing that we are in a good position to help investors change ingrained habits, offering our words of wisdom not only through our work, but also through the wider channel of this regular blog.

As always, we do emphasise that investing in shares is not for everyone. Their value can fall and you can get back less than you invest – if you are unsure, you should seek independent advice.

We look forward to sharing our knowledge with you over the coming months.

Richard Clark and Simon Patterson joined Barclays Wealth Newcastle at the beginning of the year as Assistant Vice Presidents and are focused on providing wealth management advice to new and existing clients, as well as establishing relationships with local businesses.

This was posted in Bdaily's Members' News section by Richard Clark .