Stock markets have been volatile over the recent past and we have seen some sensational headlines from “business commentators” over the last week or so. This is standard fare and you would imagine at this stage of my career, it wouldn’t bother me at all. But it does!

 

The problem is that I know that volatility is perfectly normal and that temporary stock market declines are all part and parcel of investing. The long term investor knows this and will ignore the noise. But we are all human and we all have emotional reactions to hearing scary news.

 

This is why we created our “Making Better Decisions” white paper recently. It addresses the various biases that affect our thinking when we consider investing. I would urge you to get yourself a copy of this white paper before you make any changes to your investment or pension portfolio.

 

I read recently that an investment portfolio is like a bar of soap! The more you touch it, the less soap you end up with. The similarities with an investment portfolio are striking. Every time you make changes to your portfolio you incur charges and you are making calls on market timing. You might not know that you are doing either of these things, but I assure you this is what is happening.

 
Another great lesson for investors is a recent study from a large and well know Fund Manager. They studied the returns for investors over a long time frame and found the following:

 

  • The investors with the best returns were dead! That’s right, investors who couldn’t make any changes to their investment portfolios.

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  • The next best category were investors who forgot about their portfolios. Yep, these people exist and because they were unaware of the existence of the portfolio, they didn’t make any changes.
     

  • And then there was the rest of the investors who got less than the market return. Yes, that’s probably you!

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    In summary:

     

  • Ignore the short term noise
  • The market commentators telling you about the billions wiped off stock markets conveniently forget to tell you about the several billions wiped ON over the past decade
  • Market volatility and short term declines are normal and TEMPORARY Capitalism works … so stock markets will increase in value over the long term
  • Your long term financial plan that is designed for you and your family will dictate your long term investment portfolio. Nothing else matters.
  • If you take an Evidenced & Academic based approach to investing over the long term, you have the best chance of getting market returns
  • Remember, dead people get the best results
  • Always think about the Bar of Soap
  • Get yourself a copy of our Whitepaper: Making Better Decisions: Know Your Behavioural Biases

     

    We are always happy to have a cup of coffee to share the evidence we have to support our long term investment philosophy. Call us if you like to meet one of our Private Client Managers to discuss our investment philosophy and more importantly why we believe the long term financial plan should always come first.

     
    You can download Making Better Decisions: Know Your Behavioural Biases in full today.
     
    Carl Widger
    Co-Founder & Director

     

     

     

    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.