Investors should remain “cautious and consistent” as Iran retaliates against the U.S. for killing one of its most revered military generals.
The message from Nigel Green, founder and CEO of deVere Group, comes as global financial markets roil on the news that an Iranian rocket attacked U.S. forces based in Iraq.
“Geopolitical tensions are certainly heightening, and this always creates uncertainty – something which markets typically loathe as it becomes more difficult to know where things are headed. In other words, they can’t price uncertainty,” said Nigel Green.
“In many regards, the U.S.-Iran situation has now surpassed the U.S.-China trade war as the biggest risk to financial markets. This has been reflected in the current volatility.”
“Investors must, of course, monitor the U.S.-Iran situation, what has led to it and where it might play out. They need to ensure that their portfolios are properly diversified by geography, industrial sector and asset class in order to manage risk, to navigate the increasing volatility and also to take advantage of potential opportunities when they arise.
“If their portfolio is indeed well-diversified, for the time being at least I would urge investors to remain cautious and consistent. If portfolios are not properly diversified, recent events could serve as a wake-up call to reposition,” deVere’s CEO added.
In terms of what investors should do against a fast-moving backdrop with many potential and far-reaching consequences, it is not ‘sell in a panic’, or the opposite reaction: ‘buy excessively’, he said.
“It’s almost impossible to forecast what the market is going to do in the immediate future – and it is much too early to say what happens next and how investor sentiment will affect markets.”
Green added that, “what we do know is that over the longer-term the performance of stock markets is fairly predictable: they go up.
“For this reason, over a longer time horizon, investing in equities is almost universally recognised as one of the best ways people can accumulate wealth.”
The deVere CEO concluded: “It is often said that the key to investment success is to buy low and sell high. The only problem with that theory is that trying to accurately time the weakest point in the cycle is impossible.
“As such, it is best to just feed the money in over time in a measured way in order to take advantage of the long-term trend of stock markets to deliver long-term capital growth.
“History has shown us that panic-selling or panic-buying can be potentially financially damaging for investors.”