Being invested in any investment market over the last 5 years has been one hell of a ride. Just in SA you would have experienced all time highs in some markets (JSE Allshare reaching above 60 000) and some spectacular crashes in others (SA Listed property index down 24% from its 1 year high), now bring in some foreign market exposure with the S&P 500 consistently breaching all time highs in the last 2 years,the FTSE 100 positive over 5 years, but down more than 5% in the last year. Finally throw the mighty ZAR into the mix, having breached R16/$1 in early 2016 and now trading under R14/$1, just reading these numbers makes my stomach turn.
It really does feel like we have been on a roller coaster ride, and not just any roller coaster. Cast your minds back to the glory days of gold reef city, when we were young and carefree, standing in those terribly long lines waiting to pile into the little cart that was going to give us the ride of our lives, terribly excited as we waited for our turn, until it was our turn, then it didn’t seem like such a good idea, having seen the faces of those getting off, we started to second guess ourselves, have we made the right decision? Do I really want to do this? What if I fall out? What if we get stuck upside down? What if, what if, what if? And then we are off : Ups, downs, ins, outs, at the end of the day we survived and not only to tell an extremely exaggerated story, but to do it all over again, the emotion, the stress, and the ride.
Being invested anywhere in the world comes with the above feelings, emotions and empty stomach-ness, especially over the last 5 years, and while there isn’t anyway to remove the two from each other, there are certainly a few things we can do to take ownership and to reduce the level of anxiety that we feel when investing our hard earned money into the abyss, I mean market.
- Don’t look to investment managers as having a crystal ball
I am telling you now, they don’t have all the answers, when markets go up, they go up, and when markets down, they go down. Yes, there are some managers who are better than others, some go up more and some go down more, there are some managers who adopt different styles, which in turn are better suited to different market conditions and will perform better than others in those conditions, but the conditions are always changing. The manager’s role is not that of a clairvoyant, they can not see into the future, do not expect them to. Even if they say they can, they are lying. Treat a fund manager, like that unreliable “best friend”, expect nothing and when you get something, you will be pleasantly surprised. Why use them then? Well, can you buy and sell your own securities, in a cost efficient manner? Do you have the know how to build asset allocation portfolios, do you have access to years of historical data indicating how different assets behave in different market conditions?And do you have direct access to the CEO’s of the companies you would want to invest in. We clearly see that Investment managers fulfill a key role, it’s just not that of delivering double digit returns year on year in a straight line.
- Take Ownership of your investment decisions
We all know there are different asset classes and they all deliver different investment returns, and we all want THE best one, but the best one for me may not be the best one for you and that is based on our specific circumstances at the time of investing. So, we as investors need to understand why we are investing into specific asset classes and 9 out of 10 times it is because we are in search of a return, a return which will enable us to achieve our goals and live the life we want. The problem comes in when the amount of money you have and the lifestyle you want are on opposite ends of the spectrum and that’s when we are forced into either lowering your lifestyle (which nobody wants to do) or investing in riskier asset classes because we are in search of higher investment returns, so we can live the lifestyle we think we want. In a perfect world, if we had enough money we could all invest in cash and live off the interest and live happily ever after, but unfortunately that is not the reality many people face, over time cash hardly keeps up with inflation and you would need a pretty handsome some of money to sustain yourself on a cash type return. So we need to own the reason for taking the investment decisions we take.
- Have a plan
This one seems like a given, but you will be surprised at how many people, don’t want a plan or have a plan. What they have and want is a PRODUCT. Now the industry and hopefully soon to be profession of financial advisers need to take ownership here, we have sold products to clients in the guise of a plan, but really it has just been a product that gives you a return based on a set of one off assumptions. The product needs to be as a result of a plan and in my world hopefully the product can be the one with the least amount of risk necessary. The plan is the blueprint for the rest of your life, it will help you identify where you are today and where you want to be over time, it will help you take ownership for you lifestyle and help you understand what to do when things go wrong, it will put you in a position to make informed decisions relevant to your life at any point in time. Only then will you be in a position to identify where you need to investment your money, but more importantly you will understand why you are investing where you are.
There is no quick fix for the above, there is no one thing to give you clarity, remove anxiety and help you get more from life. There is no solution whereby you can work with a professional who genuinely cares more about you than he does your money, a professional who is there helping, inspiring and encouraging you do all the things you need to do to make your best life a reality, or is there?
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