Private Investor: Don't panic, they're only paper losses

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The Independent Online

I've just had my worst month in three years. As you may have noticed, the markets have been having - ahem - a difficult time. Because I've got lots of emerging markets exposure, through a variety of investment trusts, the recent sharp corrections in those markets, even worse than in London, has meant that my realised performance has been truly dismal. The paper losses are there for me to see and weep over.

Yet I don't feel too bad about it all. If you watch your wealth decline by 3 per cent in a single day, I suppose you figure either that you'll be worthless in a month or so, or that things will eventually return to the trend growth.

This is especially true of emerging markets. Indeed, I was exposed to them back in 1998, at the time of the Russian, East Asian and Latin American financial crises - a far more fretful period. Anyone who puts money into these places has to reckon with great volatility and the prospect that decent returns could take decades to come though.

So, after the storms of 1998, I kept on investing in emerging markets, India in particular. I wish I'd bought more at that time, but again that's with the benefit of hindsight. I simply don't think it's possible, long term, to time your investments and go in and out of equities with the sureness of touch that guarantees success.

Or rather, I don't have much faith in my own abilities to do so. I do know people who make tens of thousands of pounds in a few days by dipping in and out of those oil and gas micro-stocks that became so fashionable for a while. I envy that ability, because I have to make do and stick with the old verities of looking to the long term, of dripping money into shares rather than splashing in and out and of our old friend, pound cost averaging. Get rich slow should be my motto.

Looking through the statement from the JP Morgan Indian Investment Trust, for example, I see how much I've been paying for those shares month by month. It has risen vertiginously, and will now drop, by about a fifth from their peak. I should have sold, of course, but that is hindsight and, as I say, I don't really trust my ability to time these things, so I just held on and now I am continuing to buy, as I will for the foreseeable future.

Not all the hype about India (or Brazil or Russia or China for that matter) can be justified, but there's still plenty of evidence and a good deal of scope for companies to transfer more and more functions to the subcontinent. Maybe a job near you is about to be exported to Mumbai or Delhi.

Easier money will be coming my way from the Standard Life demutualisation and flotation. As I wrote a few weeks ago, I voted yes to the proposals, with some reservations. I will also be keeping up my tiny with-profits fund investment with the company. I hope, more for the sake of fellow policyholders with a bigger financial stake in Standard Life, that the infusion of external capital the company should be able to draw upon does the trick and means better investment returns. However, if I were one of those people receiving tens of thousands of pounds in Standard Life (rather than the minimum £500 worth), I think I'd be looking to diversify my risk somewhat.

I ought to mention that the public relations people at BAA have been on at me about the Ferrovial bid. They didn't really need to because I'm not convinced, as an investor and as a traveller, that the Ferrovial bid is very promising, and I don't think it'll succeed either, despite it being upped.

I'm also pleased that BAA has found an interest in boosting shareholder returns. Now all it needs to do is tidy up Heathrow airport, which I flew into last week, and which seems more squalid and tatty than ever. It wouldn't take much money and might make us all more inclined to believe in BAA management's ability to look after the fine assets they are entrusted with.

s.ogrady@independent.co.uk

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