Many of us would like to see the back of 2020, as it will go down as one of the most challenging years in history.
So, what investment strategies should we be implementing to counteract this instability and give us greater control over our financial future?
Let’s break things down a little. We can find ourselves getting caught up in the emotion of the time and the vast amount of negative media that we see might make us believe that the world is ending, we should grab our money with both hands and stick it under the bed. Most people know that this isn’t the best long term answer, so what should we do? The answer to this question is what everyone wants to know. Will markets go up or down in the short term? Will property go up or down in the short term? Are bank interest rates going to go lower? There are lots of questions, but not many answers out there.
We all know though, that the answers to these questions are not straight forward. Even the experts have different opinions and the reality is that no one really knows what will happen in this crisis in the short term as there are just too many variables that could have an impact on the end result. I’m not going to tell you anything different to what you’ve been told before. But I am going to help give you some clarity on the things you should be thinking about and perhaps some practical help on navigating your way through all this change.
The reality is that we need to try and pull back from the emotion that we’re seeing every day and take a longer-term, more objective view and stop worrying so much about the short term. Historically, investments like shares have always gone up and down, but over the long term, they continue to increase in value. The mistake that many people make with growth assets such as shares is taking a short term attitude where they try to time markets, wanting the ups but not the downs. When the downs inevitably come, they seem surprised and even somewhat angry or just scared that they’ve “lost” some of their investment.
Growth assets are for the long term and a sensible investor needs a cool head to be able to withstand the ups and downs. Sticking to your long term investment plan is generally the best option, but you need to make sure that first you do in fact have a long term plan and also that you have a long time to invest. That’s where we come in. Our job is work with you to work out what’s really important to you and to then ensure that you put in place a plan which will see your dreams become a reality. We’re also someone that you can talk to in the tough times, like a personal trainer, to keep you on track, to have the tough discussions, and to ensure that you don’t make an impulsive decision in a moment of fear that undoes all the good work you’ve put in.
We also need to ensure that we work out how much risk is the right amount of risk for you. This is different for everyone and should be different at different stages of life. Some people are just more comfortable than others when it comes to risk; some people worry less than others and are naturally more resilient in tougher times. It’s important to understand how you might react when the tough times come. We also need to make sure that you have the time to ride the ups and downs. There’s no point in investing in volatile investments if you need the monies back to use in the short term. You’re now gambling that markets will be on your side, you might get lucky, but you might not.
As you can see, there is a lot to think about when it comes to investing and I could write much more on the subject. If you’d like to discuss taking control of your financial future please book a time to come and chat with us. We’d like to offer you an obligation-free, cost-free initial appointment, to have a chat and see if we can help you further. We’ve been providing advice across Brisbane for many years now and have many loyal and happy clients in the area.
Terry Cave, Financial Adviser