Investment Newsletter - February 2023

Staying the course & information hygiene

Good afternoon,

In this newsletter we want to cover two broad topics, titled “Staying the course” and “Information Hygiene”.

During the floods and cyclone, the news published the effects and magnitude of the disasters, broadcasted live updates, reported how the government responded, and provided us data about the regions most affected. As days went by, news about the economy creeps in.

“Flood impacts add challenges to inflation”

“GDP will be severely affected”

With all the information that we obtain, be it the news or click baits amplified by social media, should you change your investment plan to accommodate these externalities?

Well… no.

Similar to when markets fluctuate, we must resist the itch to switch your investment strategy. Your adviser will have taken into consideration what the long, medium and short-term strategies are in relation to your investment plan. Your investment plan should have anticipated and factored in volatility in the market. Therefore, straying away from the plan essentially means you will lose track of your what your investment is meant to be doing for your needs and goals.

 
 

In turbulent times, financial news might seem to be getting more traction. Not surprising, given that the news act as a medicine for many. When we find out something has happened, we instinctively want to discuss it with family and peers, and dig deeper, to determine the many reasons, sometimes outside of our control of why this or that happened. This phenomenon is not unique to financial news. News on wars, natural disasters and pandemics experience the same “despair” similar to when the financial markets go down.

In this newsletter, we will touch on two very serious matters that we believe every investor should be wary when seeing information on the web; scams and an influx of unfiltered financial information.

First, is regarding investment scams. The New Zealand Financial Markets Authority (FMA) indicated that about 20% of the population has been targeted by investment scams. Among the latest, Kiwi investors have been warned not to trade with Validus, a company promising returns up to 300%, allegedly generated by professional traders trading in cryptocurrency, foreign currency and other financial products [1].

A quick web search on “Investments” would show investment products that promotes a company’s promise of high returns, low fees, etc. While these features could look attractive, we must always perform some due diligence on the companies that offer these. While returns are a substantial factor in the investment planning and decision making, there are many other quantitative and qualitative factors that you must consider in choosing your investments. If you have any concerns or would like our opinion on something before you invest, please reach out to us and we can assist you.

 
 

Secondly, scams are not the only information threat to investors. We can also see that the information being shared on social media encourages people into making impulsive decisions, or often times propagate a sense of “fear of missing out”, or more commonly known as FOMO. Due to the massive number of users on social media platforms, we must always be aware of unverified and unreliable information, and to some extent “opinions”. Social media has created a new type of celebrity, one that posts about financial advice, known popularly as “finfluencers” and they most often lack proper qualifications and are not registered with a regulatory body. They could offer “advice” on anything and everything, from purchasing real estate, to buying cryptocurrency.

While is it a positive phenomenon that people can easily access information about finance and financial products, we must always keep in mind the reliability and trustworthiness of the information before acting on them. For example, a cryptocurrency investor could be displaying their wealth and returns on a good year, however, fails to mention the extreme volatility and risk associated with it, due to the fact they were paid to promote the investment product. Much like a punter at the horse races who only tells you about their wins.

This ultimately highlights the value that a trusted financial adviser brings in; acting to filter and verify the information and using them to help you with your investment planning based on your needs and goals.

In summary, there are some information hygiene habits that we ought to exercise to protect ourselves from straying away from your investment plan. These habits include the following:

  • Exercise Skepticism if the investment opportunity seems too good to be true. If an investment product offers “high return, low risk” we should be wary of what the investment actually entails.

  • Be cautious of opinions that you see and hear, particularly when the framework of the “investment advice” revolves mainly around the returns of an investment and not about the strategy, risk associated, and what the investment involves.

  • Use trusted, established sources for financial information.

  • Tighten your privacy control to avoid your information being leaked.

  • Most importantly, seek out a licensed financial adviser for financial advice who understands your circumstances, needs, goals and risk appetites.

We are only a phone call or an email away should you wish to discuss anything. Please get in contact with your adviser or contact us on 0800 NO STRESS (0800 667 873) or email at info@foxplan.nz if you have any questions or would like your adviser to talk through your current investment plan.


Kind Regards,

The FoxPlan Team
 


[1] https://www.stuff.co.nz/business/131199552/scam-warning-over-investment-opportunity-promising-300-returns

 

References

Arvedlund, E. (2021, April 15). 20 YEARS AFTER I FIQUESTIONED BERNIE MADOFF’S SUCCESS, THE GREAT VILLAIN OF THE FINANCIAL CRISIS IS DEAD. Retrieved from Vanity Fair: https://www.vanityfair.com/news/2021/04/bernie-madoffs-success-the-great-villain-of-the-financial-crisis-is-dead

McCarthy, K. (2009, 05 20). Madoff Feeder Fund Sued for $3.5 Billion. Retrieved from abc news: https://abcnews.go.com/Blotter/story?id=7624661&page=1

Taunton, E. (2023, February 10). Scam warning over 'investment opportunity' promising 300% returns. Retrieved from Stuff: https://www.stuff.co.nz/business/131199552/scam-warning-over-investment-opportunity-promising-300-returns.

 





Holly Jones