Investment Newsletter - June 2023
Good afternoon,
We are pleased to enclose our June Update for 2023.
Consider your financial adviser as your personal trainer. Much like a personal trainer, a financial adviser possesses expertise and knowledge in their respective field. However, their value extends beyond their expertise.
For most of us, the issue isn’t that exercise is too complicated but rather the motivation to exercise consistently to achieve the desired results. In other words, the value of a personal trainer probably has more to do with the discipline of consistent exercise, than with the technical nature of how to correctly perform the exercise.
Ben Graham, the author of one of the most referenced books on investments titled: The Intelligent Investor, was quoted saying “an investor’s chief problem – and even his worst enemy – is likely to be himself”. This links to a 2011 paper titled “The Behaviour of Individual Investors”, where professors have found that the main obstacle to financial success often stems from behavioral and psychological factors.
Their five conclusions were that, in general, individual investors,
Underperform standard benchmarks (e.g. a low cost index fund)
Sell winning investments while holding losing investments (the ‘disposition effect’)
Are heavily influenced by limited attention and past return performance in their purchase decisions
Engage in naïve reinforcement learning by repeating past behaviours that coincided with pleasure, while avoiding past behaviours that generated pain
Tend to hold undiversified share portfolios
The role of an adviser is to counteract the impact of these factors that have the potential to undermine sound and effective long-term investment decision making.
To change behaviour, we assist you with defining what you really want your money to achieve for you in life. We must then substantially increase the probability that you are able to achieve those outcomes. The key is to help you make smarter investment decisions and prioritise what matters to you the most. The best advice is honest and sometimes confronting, but it is decisive and adaptable to changes in markets and lifestyle.
It's not that investing is difficult, it’s just difficult for most individuals to do it consistently well. Like exercise, it’s not about making a big effort every once in a while. Great advice is best to be implemented consistently and carefully over a long period of time.
Investors would do well to think of their financial adviser as their personal (financial) trainer. Not just because an adviser is more likely to help us make better long term investment decisions, but because he or she will keep us motivated and on track when we might otherwise succumb to poor behaviour.
Investing in Inflationary Times Event
We are proud to say that our investment event went wonderfully and we have the presentation slides available from the workshop. If you would like a copy, please email info@foxplan.nz and we will email you the document.
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