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August share falls – a cautionary tale

14 September 2017

August provided a reminder that even in seemingly quiet times, the value of individual shares can be volatile.

August is traditionally a month when the turnover on stock exchanges slows down because many people are on holiday. In the jargon, trading can be “thin”.  That doesn’t mean, however, that nothing much happens. While the FTSE 100 (top line in blue) merely wobbled, there were some major movements going on for individual companies, both within and outside the index.

One example is that of Provident Financial Group which released its second profit warning in August and unexpectedly to most, scrapped its dividend payment. This month the company will be ejected from the FTSE 100 because its value has fallen so much.

In another demonstration of how fortunes can quickly change, Dixons Carphone, was a member of the FTSE 100 until demotion in March of this year. This High Street electronics retailer, revised down its profit forecast, bemoaning the reluctance of smartphone owners to update their handsets as regularly as they once did. The announcement was again off the radar, with the inevitable result on the share price.

Broaden the spread

The performance of these two well-known companies serves as a useful reminder of the potential dangers in holding a handful of shares, perhaps acquired via an inheritance or employer share schemes. Whereas a broad holding of shares (the FTSE 100 being a useful example here) spreads your risk, concentrated holdings can have the opposite effect. You may be happy to accept the potential rollercoaster ride, but if you are not or are just unsure about the risks in your current holdings, talk to us about bringing diversification into your investment portfolio.

What next?

If you would like to discuss your own financial circumstances, speak to your Chase de Vere adviser, call us on 0345 300 6256 or complete this form for a call back.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.