I took a 5.5pc October haircut — but it could have been far worse

THE early autumn stock market storms seem to have abated for now — but how much damage has been done?

Few of us have the time to keep up with every investment on a daily basis, but periodic checks can give us a good idea of the direction things are heading.

The last time I reported on all of my investments for this column was in mid-July.

Compared with then, the FTSE 100 index of shares in our biggest companies is down almost 7pc; the MSCI Emerging Markets index is down nearly 8 pc.

The MSCI World Index, which gives a snapshot of large and medium-sized companies around the world, is down 4 pc.

My investments have lost just over 5.5 pc of their value, so having a bit of money here and a bit there — known in the trade as balance — has paid off to a degree.

But the real point is that despite all the headlines and fear in October, we’ve really only seen a minimal correction.

In 2008, the FTSE 100 fell by 31pc; this year it is down around 8 pc. Go back further and it fell by more than 50pc between December 30, 1999, and March 10, 2003.

So all we’ve really seen so far is a blip. Mark Dampier, Hargreaves Lansdown’s research director, tells me that in most years there will be a 10pc fall in share prices at some stage. Recent years have been unusual.

But he says that going forward we could be in for ‘trickier times’, with stock markets reacting strongly to whatever the latest set of data may be.

We are facing plenty of uncertainty such as Brexit, inflation, Donald Trump’s trade wars and interest rates in the U.S. Dampier is not alone in suggesting that after a long period where funds based on growth stocks (those whose share prices have shot up) have been to the fore, conditions may be swaying towards the solid value companies that pay regular dividend income.

Looking at my own holdings, there were one or two unpleasant bumps in October.

Baillie Gifford American lost almost 15 pc of its value.

It’s hardly surprising when you look at its exposure to technology stocks such as Amazon, Netflix, Tesla, Alphabet and Facebook. The sector took a hammering — over the longer term it’s down 7 pc since my July checkpoint.

In fact, my portfolio pretty much reflects the October correction, where some companies whose shares prices have previously raced up took a real bashing, while others rode the storm pretty well.

Since July, Fidelity Asia is down a little over 10pc — reflecting the uncertainties in emerging markets — while Artemis Income, a UKheavy fund, has lost 8.8 pc.

Merian (formerly Old Mutual) UK Smaller Companies fell 8.7 pc, while Standard Life UK Smaller Companies and the HSBC FTSE 250 tracker were both down 8.5 pc. But many UK funds — including Fidelity Special Situations, another of my holdings — could benefit from a good Brexit deal, says Dampier. I hope he’s right.

So which funds weathered the storm best? Newton Global Income increased by 0.5pc over the four months. This fund has almost half its money in the U.S and about a fifth in the UK. I feel that its focus on solid businesses makes it a decent home in volatile times for my money.

Lindsell Train Global Equity, which has around a third of its money in the U.S., a third in the UK and a fifth in Japan, lost 1.3 pc since July, though it had a tough October.

Take a look at the fund analyst company Morningstar description of the fund and the clue is there. Almost half the fund is in shares that are regarded as ‘consumer defensive’ ones.

LF Odey Opus lost 1.8pc. It’s main holding is Sky, making up almost 10 pc. This is what is known as a conviction fund, where the manager may pick out-of-favour but strong companies.

Another fund which held up well was Fundsmith Equity, which is 2.4pc lower than in July. Analyst Morningstar describes this as ‘one of the strongest options for investors seeking exposure to highquality global equities’.

With two-thirds of its money in the U.S. and a fifth in the UK, the biggest holdings include PayPal Holdings, Amadeus IT, Microsoft and Facebook.

There’s one other point worth highlighting. The FTSE 100 index of shares in our biggest companies only finished October 5.1pc lower than it started.

But the biggest individual loser that month, Royal Mail, fell 24.8 pc after a profits warning.

This highlights how much riskier it can be to hold individual shares than investment funds which hold a mix of shares.

Even with their higher costs, for most amateur investors like me they are a wise option.

But, above all, the key to weathering any storm is balance.

As Dampier says: ‘If everything in your portfolio is doing well, then you should be worried because it suggests all your investments are concentrated in one area.’