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Predictably unpredictable

Don't get sucked in by doomsday headlines and the inevitable stagnation of the market; plan for these stumbling blocks and use them to your advantage, advises Colin Lawson

17 November 2014

It's been an interesting two months for stock-markets, not just in the UK, but around the world.

Having reached a peak during the past year of 6,904, the FTSE 100 lost almost 11 per cent to close at a low of 6,195 on 16 October. For some strange reason, this drop seemed to come as a surprise to many investors. It really shouldn't have been a shock as drops like this (officially known as corrections) happen almost every single year. Personally, I would have been surprised if the year had ended without it happening and at Equilibrium, we positioned portfolios to benefit from it.

So, why is there a disconnection between what is likely to happen, how investors react when it actually happens, and what can we learn from it?

Firstly, the media loves bad news - it's what sells newspapers. Secondly, the storytellers have to put a 'label' on events to try to explain why they are happening. They are prone to exaggerate and so naturally,...

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