Six Tips for Financial Uncertainty

Wednesday, September 02, 2015

By Angus Dockrill, Director & Wealth Specialist IMFG. This note is unashamedly meant for those that have made the conscious choice to be a long term investor (and not a short term speculator) with a view to improving your decision making during this period of market uncertainty.

Six Tips for Financial Uncertainty 

As we write this note global investment markets have fallen by more than 3% over a 24 hour period for the third time in a little more than a week.

This news may be particularly concerning for folks that have based their investment plan on speculation with an investment strategy that may be heavily concentrated, short term in nature or following the latest fad. 

However, the long term investor who holds a broadly diversified investment portfolio expects that markets will go through periods of uncertainty exactly like the current. Those focused on achieving and maintaining financial independence understand that this is part of the price one pays in order to capture the returns that capital markets offer.

If you are a long term investor who finds yourself more than a little anxious during these last few weeks, here are a few things that you can do protect yourself from wilting to the dark side of fear.

1.Dial down the noise

2.Have a ‘buyers’ mindset

3.Focus on your goals (& not others)

4.Don’t overreact

5.Don’t forget tax

6.Control what you can control

Some of the macro-issues in China and those lingering within the European Union, in particular, may take a while to work through. It’s important to keep things in perspective, which is why we believe it to be valuable in working with a professional financial advisor with whom you trust and is available to guide you along your life’s journey.

  1. Dial down the noise – Information is important, however, the more time you spend in front of the TV the more fear will creep into your thoughts. As my journalist friends say “if it bleeds, it leads”!  So, if you want to improve your wellbeing try taking a news hiatus.  Better yet, a good quality fee for service financial advisor will help ‘filter’ all the noise of the 24 hour media cycle and, through the perspective of a professional third party, put you in a better headspace to make investment decisions that are in your long term interest.
  2. Have a ‘buyers’ mindset – Businesses listed on the worlds capital markets are on sale and are significantly cheaper than they have been in the past.  There are also signs that property is stagnating.  If you believe ‘capitalism’ will survive the current malaise, then having a ‘buyers mindset’ that is open to investment opportunities will help. Given no one really knows the direction of the market on any given day you may find it useful to ‘dollar cost average’ any additional investments. Buying incrementally and regularly minimises the risk of ‘investing on the wrong day’ in a manner that may make the long term investor more comfortable. Diversifying your investments remains a smart and sound strategy.
  3. Focus on YOUR goals (and not others) – What is it you want your money to do for you? Do you want long term financial independence with the ability to pursue your life’s passions? Or short term concern based on speculation?  Invest some time in boosting your relationships with those important to you and pursuing your passions in life. Does the recent downward move really impact your day to day activities? Does it impact your ability to fund your lifestyle in 2020, 2030 and beyond? A strategic review of your financial plan will help.  
  4. Don’t overreact – Take a deep breath before making any change to a long term diversified portfolio. Selling positions in shares, property and managed funds will require a second act: buying back into the market. Unless you can properly time the re-entry to the market, you will fall short. All the research that I have seen demonstrates that even the most professional of investor is unable to time the market with any material degree of consistency.  
  5. Don’t forget tax – Taxes are often one of our largest expenses and not many want to pay more. Will selling assets now crystallise capital gains tax? Will you more than make this back in an alternative investment? Is there any value in realising capital losses? Think twice before making any rash change to your portfolio to avoid unintended consequences. The advice of a specialist can help minimise tax.
  6. Control what you can control – We can’t control the market, but what we can control will have a large impact on our financial future. For the wise, managing taxes, controlling spending, investing savings appropriately and managing how we react to the market will have a greater impact on your long term level of financial security than what the market does in the next week. 

Again, it’s great to have someone to talk to when things get uncertain.  As specialist advisors armed with strategies to guide you through times like this we are here to help.

By Angus Dockrill, Director & Wealth Specialist IMFG

Image by Behavior Gap: www.behaviorgap.com

General Advice Disclaimer

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. Past performance is not a reliable guide to future returns. Opinions constitute our judgement at the time of issue and are subject to change. Neither IMFG, its Licensee, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

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