Wealth Management

12 Days of Christmas: Three French Hens

On the third day of Christmas my true love sent to me, three French hens. We mark Day 3 of the 12 Days of Christmas, with the faith, hope and love of the three French hens and how emotion should not be the main driver for your ongoing investment decisions.

12 Days of Christmas: Three French Hens

The Three French Hens stand for faith, hope and love: all such valuable emotions in the COVID- ravaged year of 2020. Why French Hens? Well one explanation is that French Hens were one prized table birds and therefore would have been a welcome present at Christmas.

Keeping faith with investments can sometimes be the right strategy to follow (click here for our article on Two Turtle Doves). However, the Rosecut belief is that showing emotion over investment decisions is a mistake. How many of us have made the mistake of holding onto a particular share or fund because it has some emotional significance, only to see the value fall and fall over the years? Emotion is for close family and friends...not a valid reason for making investment decisions.

Also the two emotional drivers of fear and greed can also lead us into making poor decisions as was acutely shown in March this year when global markets plunged only to then stage a remarkable recovery over the next weeks and months. In the first quarter of 2020, global stock indices posted substantial losses that were triggered by the outbreak of COVID-19. The period from 6th to 18th March was particularly dramatic, with several stock indices losing more than 20 percent of their value.

From the UK to the United States, stock market indices suffered steep falls as the pandemic created substantial economic uncertainty. In the Unites States, the Nasdaq 100 and S&P 500 are two indices that track company performance and both lost value as lockdowns were introduced in the country. European markets also recorded significant slumps, which triggered panic selling among investors. The FTSE 100 – the leading share index of companies in the UK – plunged by as much as 21 percent in the opening weeks of March 2020. The message is clear that had fear led you to sell at the end of March you would now be nursing some very depressing losses.

The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested. This may be partly the result of exchange rate fluctuations in investments which have an exposure to foreign currencies.

If you would like to read the previous article for the second day of the '12 Days of Christmas: Two Turtle Doves' please click here.