Investor behaviour is such a curious thing, it impacts everyday on stock markets around the world, so given the current situation it is probably worth a closer look.
I could continue to write about the FTSE, economics, China, oil, etc, etc until we are blue in the face but it doesn’t make a blind bit of difference, as we cannot influence the markets.
Investor behaviour is much more likely to have an influence on the eventual outcome of an investment portfolio than short term fluctuations in the stock market.
This is also true of investment managers and stocks, the constant search for “the best investment” is ultimately futile as it is much more about goals, savings, and behaviour.
While this is true it is also wise to remember that it is extremely unlikely that the fluctuations in your portfolio will in any way resemble the fluctuations of the FTSE or any other index, if well managed.
I am sure I have referenced Carl Richards before, we have given his book “The Behaviour Gap” to a number of clients, and often use his illustrations in our presentations.
The reason for this is the sheer simplicity of the message
Investment returns are just one of the ways to achieve your goals, but more importantly you have to make sure you don’t make investment decisions that will be to your detriment, such as below.
I am not saying we are immune from this, as advisers we can sometimes become too focussed on market fluctuations, such as we are experiencing at the moment.
It is too easy to forget that this is short term and unless the money is actually required at this moment, then it doesn’t impact on you.
Where income is being taken then we have too look for the best ways to mitigate the impact of the markets, while always keeping an eye on longevity.
Focussing on your goals, adjusting them along with your strategy is the only way to ensure the best possible outcomes.