It’s been a pretty tough and unwelcome start to the year for financial markets. Bloodbath, carnage…mainstream media have got their hands all over it.
In times like these it’s important to review your investment strategy. Don’t take the lead from mainstream media. They’re not looking after your investment portfolios. Frankly, they don’t care about what you do with your super. They want to sell advertising space.
The worst thing you can do is let your emotions drive your investment decisions. Panicking is not a virtue of an experienced and sensible investor.
Here are a few things to think about when times get tough:
- It’s all about context but to take it even further, it’s all about context in your personal situation. How has your specific portfolio performed over the long run? Don’t form an opinion based on the “market” return that they talk about on TV. How has your portfolio performed? That’s all that matters to you.
- Shares rise and fall, and if you’re sensible you won’t have all your eggs in shares. Defensive assets would be holding their ground.
- We have 20/20 vision in hindsight. Be humble and acknowledge that no one (including you) can predict the future with certainty. It’s easy to say after the event “the writing was on the wall”. To be honest, when you’re in it, you have no idea whether it’s going to last a week, a month, or a year. Bear in mind, it could last a week, then rise for 3 months, then go down again for 3 weeks, then rise for 1 month, then go down again for 2 months, then rise for 7 months…you get my drift. You just don’t know when we’re at the peak or the bottom, so don’t run an investment strategy as though you know. Choose a strategy that sustainable, consistent.
- Consider increasing defensive assets before moving everything to cash.
- If you really need to go 100% cash, have a re-entry strategy as it’s unwise to stay there long term. I’m sure you know the concept of inflation, along with the evidence of diversified portfolios providing better than cash returns over the long run. Obviously this doesn’t apply to those who’ve amassed a large sum of cash and can live on the interest.
At Access FP, we are able to provide professional advice to help you build and maintain an investment strategy that suits your personal situation. For more information on the Investment services we offer, check out our Investment Planning page.
By Ray Ong
Contact us on 08 9381 6811 for a complimentary consultation. Ray is a CERTIFIED FINANCIAL PLANNER® and LIFE RISK SPECIALIST® and has a Bachelor’s of Commerce in Financial Planning (with distinction). He is a member of The Financial Planning Association of Australia. We are based in Perth, Western Australia and specialise in retirement planning, wealth accumulation and wealth protection (life and disability insurance).