A Lesson for Investors

 

You may not have heard of Eike Batista before. But a quick Google search and you can read all about the man who in 2010 was deemed the 58th most powerful man in the World before falling from grace and ending up being sentenced to 30 years in jail. It’s a really fascinating story and I wouldn’t be at all surprised if his life story made it to the big screen at some stage.

 

If you want a brief summary of his life and times, have a read of this:

 

Click here to find out more about: Eike Batista

 

Eike was sentenced to 30 years in jail in 2018. His net worth was once estimated at $30 Billion Dollars. By the time he faced trial for corruption and bribery, he was a negative billionaire.

 

I was intrigued reading his story. As regular followers of Metis Ireland know, we have been talking a lot recently about behavioural biases and how they affect long term investment decisions. All the evidence points towards the fact that successful Wealth Management and Long Term Financial Planning has it’s foundations in disciplined behaviour.

 

This is why we spent so much time in 2018 preparing our White Paper: “Making Better Decisions – Know Your Behavioural Biases”. We firmly believe that once you have established a long term financial plan that is designed to allow you LIVE THE LIFE YOU WANT, then you should implement an appropriate investment strategy that is diversified and invested in asset classes that have a long track record of providing the best outcomes i.e. equities and bonds. You then MUST #StickWithThePlan.

 

Eike Batista made some very obvious errors with his investment and business decisions. He didn’t diversify at all – he was entirely focused on commodities which breaks golden rule number 1.

 

He also borrowed huge amounts of money to fund his investments. I have a phrase that lots of my clients will have heard before:

 

“Debt is the killer of Financial Plans”

 

I’m aware that it’s not very eloquent and unlikely to make it into any “Top 100” quotes list! But the message is clear. I do not believe it is a good idea to borrow money for investment. It accentuates losses and this is the very reason Batista ended up being a negative billionaire.

 

Consulting our White Paper, it is interesting to note the Behavioural Biases that affected Batista along his journey. They are not limited to this list, but I think it is safe to say, he allowed these biases stand in the way of good (disciplined) investment decisions:

 

  • Blind Spot Bias (page 7 of Making Better Decisions)
  • Confirmation Bias (page 8 of Making Better Decisions)
  • Familiarity Bias (page 9 of Making Better Decisions)
  • Greed Bias (page 12 of Making Better Decisions)
  • Hindsight Bias (page 14 of Making Better Decisions)
  • Overconfidence Bias (page 18 of Making Better Decisions)

The conclusion for Eike Batista is that he should have consulted Making Better Decisions! The conclusion for the everyday investor is that you need to be aware of these Biases and understand when they might adversely impact your decision making when it comes to your money. Emotional or rash decisions will have a detrimental impact on your ability to Live The Life You Want.

 

World Class Financial Planning will help you #StickWithThePlan and get the very best outcomes in the long term. This is what we deliver every day at Metis Ireland.

 

We are happy to share Making Better Decisions – Know Your Behavioural Biases. In fact, we believe we must share this with as many people as is possible. This will help us have the most impact on the financial lives of our clients and ensure that we commit to our Mission Statement:

 

Our clients will be in the best possible position to achieve their lifestyle goals.

 

Our clients will have a clear financial road map.

 

Our clients will always be served by a highly qualified team of honest and energetic professionals. We will always act with integrity.

 

Metis Ireland will always be synonymous with world class financial planning.

 

You can download Making Better Decisions: Know Your Behavioural Biases in full today.

 

If you’d rather read the report in bite-sized chunks, we’ll be posting the lowdown on each type of bias, how it works and why it’s dangerous on our blog in the coming weeks, or you can opt in to email updates.

 

Carl Widger
Co-Founder & Director
Email: cwidger@metisireland.ie

 

 

 

Disclaimer

Metis Ireland Financial Planning Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland.

All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified independent financial adviser before entering any financial contract. Metis Ireland Financial Planning Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.

Disclaimer


Metis Ireland Financial Planning Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland.


All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified financial adviser before entering any financial contract. Metis Ireland Financial Planning Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.