What can investors learn from sport?

Solomons-financial-advisor-wimbledon-blogger

What can investors learn from sport?

I apologise to those of you that do not like sport, the purpose of this post is not to bleat on like some bloke at the pub who is attempting to name his best eleven… again… but to make an observation about the way people behave and in particular what investors can learn from sport.

I wonder if you watched the final of the T20 World Cup at the weekend. It was a thrilling match – (spoiler alter) England were eventually beaten by the West Indies. The “English” team (nationality in sport is debatable) started badly, losing Roy, Hales and Morgan very quickly. At 23 for 3 things looked pretty bad.

These days I delude myself that I can multi-task, so flicked between TV stations, watching football, Grand Prix, the cricket and keeping an eye on the social media (yes it would appear that I’m rather sad and lacking an attention span). However, getting to my point – social media exposes an array of reactions (commentators term them emotions) that people reveal as they experience an event.

Too early to call

Many had written off England with the fall of the third wicket, several used terms like “game over” before the team had even completed their attempt to score as many runs as possible within 20 overs. The game had not even reached its half-way point, but thousands had already conceded victory.

Its not over until its over

The English fortune turned around equally as quickly once the West Indies began to bat, crumbling to 11 for 3 and struggling for runs. Suddenly there was “hope”. Indeed by the end of the 19^th over (of 20) another 19 runs were needed, which seemed out of reach for Carlos Brathwaite, the facing West Indies batsman, who had 10 runs to his name. England were in the proverbial “driving seat” and now expected to win. Brathwaite had other ideas and promptly smashed each of the next deliveries for six runs, resulting in a dramatic victory and tournament win. Of course sad and desperate for Ben Stokes, the English bowler.

Investor behaviour is invariably no different from those on social media at the weekend. Reacting too quickly, feeling depressed, exasperated, then gaining some hope , followed by over confidence, followed by…. Repeat.

Your goals, not someone else’s

Investing is not a hobby, it is not a sport (unless you really are very rich). It is no way to learn about yourself and no place for reactive emotions. We approach the end of the 2015/16 tax year tomorrow. The deadline invariably pushes prices up. Whilst I am obviously (I hope) of the view that allowances ought to be used when appropriate, any investing should only be done if it helps you to reach your goals, not those set by HMRC.

Part of my job is to keep clients disciplined, avoiding mistakes and sticking to their own plans (not mine). This has been termed “adviser alpha” and adds an unquantifiable amount of value, though many attempt to quantify this.

The media in all its forms constantly stirs feelings of anxiety or missing out on opportunity. The vast majority of commentary about investing is about as relevant to your financial plan as any sporting event – completely irrelevant! Trying to perfectly time the market (the opportune moment to buy and sell) is frankly impossible to achieve with consistency. In practice few do so and fewer still can demonstrate this as skill rather than luck.

Have a Successful investing experience

Unlike sport, investing does not have to be about “winner takes all”. Everyone can win if they are investing in a way that fulfils their financial planning goals. They key is remaining calm, disciplined and clear about what you are really trying to achieve.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

What can investors learn from sport?Dominic2023-12-01T12:19:18+00:00

Bonfire of the Vanities and Awards

Perhaps you watched the BAFTAs at the weekend? It was certainly hard to miss Monday morning headlines, which largely featured Leonardo DiCaprio clutching his award for best lead male actor for his role as Hugh Glass in The Revenant.

The double-edge sword of social media is that anyone gets to have a say, which frankly is often unwise. If you follow twitter or any social media, you will probably be aware of the proverbial storm in a teacup following remarks the host Stephen Fry made about Jenny Beavan’s appearance. If you didn’t see it, well, she is a brilliant costume designer and was perhaps the only one that didn’t appear to dress up for the awards, which is generally regarded as a black tie/cocktail dress event. Though some men wear a regular tie rather than a bow tie. Ironic gesture, couldn’t be bothered, making a point, or didn’t read the memo. I have no idea, but as someone that was in London at the same time, one might consider another view that she was appropriately dressed for the weather on 14th February 2016. The truth is I have no idea.

Fury Road

Anyhow, she won a BAFTA for costume design for the film “Mad Max, Fury Road”. Mr Fry made a comment about her attire, which was met with gasps from the audience and a tidal wave of comment on social media. Mr Fry then chose to tackle this head on, saying it was a joke, with a close friend and people should.. well, find other uses for their time…. In fact had this all happened before the film was released, one could have been forgiven for thinking it was a PR stunt (Mad Max, Fury Road).

Et tu Brute?

So why bring this to your attention, what has it to do with financial planning? Nothing and everything. There isn’t a connection, but there is an observable behaviour that took place – that of the herd mentality. It seems that there are a great many people who are very quick to pass judgment without possession of all the facts and very quick to pronounce others as something unpalatable. There was the equivalent of a stampede to get one’s knife in… et tu Brute? The exchange between sides was fairly unsavoury, albeit without a single physical blow.

Investor Behaviour – the herd mentality

This happens with investors too. They panic in a herd and run for the lifeboats, just because someone seems to have yelled “lifeboats?” (or crash). There appears to be little thought of whether the facts are accurate, the context or whether to the lifeboat option is actually the safer approach. If you are RBS and your portfolio is full of rubbish, you might understandably say “sell everything” but if you don’t it makes little sense.

Investor panic is understandable in a world where the media is reporting doom and gloom, red exchange boards and falling stock markets. But remember that the media is there for a variety of reasons, not simply to provide “the truth”. It will never be held accountable for predicting the future other than in a joke about previous blunders.

As I hope you know by now, most investors underperform the market by attempting to time the market – trying to second guess when is the right time to buy and sell. They underperform by around 3%-6% a year. Yet all the time, there are those screaming – do something, sell, buy… whatever the herd is doing. If you don’t believe me check some easily found research at Dalbar.

The Subjectivity of Art

The BAFTAs and any other award ceremony is frankly nice, but just silly. They are highly subjective gongs for a very small number of people, selected by a lightly larger group of people. Yet even within the hallowed walls of such organisations, one wonders if everyone that voted actually saw the films they voted on. Frankly I suspect not. It is the only way I can rationalise some of the winners…. But then its subjective and nobody gets hurt… right?

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Bonfire of the Vanities and AwardsDominic2023-12-01T12:19:23+00:00

The Big Short

I have been looking forward to the release of “The Big Short” for some time. I suspect that many will yawn with incredulity at the prospect of watching a film about Bankers and the financial crisis… all that jargon, which is, lets face it, all rather dull and old news… I beg to differ.

This is a story well told, but a story that is frankly unbelievable, yet it happened. I would urge you to go and see it, I managed to do so on Monday evening (no I did not claim it as an expense). It will not change your mind about the Heads of Investment Banks or regulators, it will remind you of how utterly corrupt and complicit they have been in ripping off investors for years, and I see little evidence to suggest that this will alter.

The film makers attempt to explain some of the key terms that underpin the entire credit crunch. It is reminiscent of the musical about Enron – yes a musical essentially about accountants, but as with the musical, this is really an exposure of some rather foolish human behaviour.

Whilst the vast bulk of the film concentrates on the American story, the financial services industry is of course global and the setting for the story is largely irrelevant.

Are you sitting comfortably?

There are many that will not like the content of the film. The film is damning in its criticism of Government, regulators, bankers, credit rating agencies and mortgage brokers. The only group to have really been punished for the crisis in the US were the homeowners and the poor – by losing everything (a story told very well in the film “99 Homes” – see my piece on that too).

Here in the UK, we took the collective punishment of austerity, tax hikes and pay cuts. But at least the head of the regulator (then the FSA) was even knighted for services to the financial services industry (!).

You may have some questions after watching the film, both at the practical level and the “what one earth are they thinking?” level. Here is the official trailer to get you in the mood… oh and the film is nominated for an OSCAR. Mind you, I was even more incensed having watched “Four Horsemen“… to my mind The Big Short is the softer option (pun intended).

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

The Big ShortDominic2023-12-01T12:19:33+00:00

2015 has been a bad year…. for investors too

2015 has been a bad year… for investors too

It has not been a good year for investors, frankly it has not been a good year for lots of people – we are all aware of the disasters and atrocities that have occurred around the world. So as you review your investments which have not performed as anyone would have hoped, a sense of perspective is probably wise.

The problem with stock market or traditional investing is that we see good years a bad years. 2015 has been a bad year, with the FTSE100 opening the year at 6,556 rising to a high in April of 7,103 (up 8.3%) but currently lagging at around 6,050 (down 7.7% over the year to date).

It is natural to feel annoyed and fed up, particularly as it is easy to get the impression that somewhere, somehow others are doing better. The truth is perhaps rather different. A fall of 7.7% is what the market provided via the FTSE100 (the UKs 100 largest companies). To have a smaller fall (or even a gain) you would have had to take more investment risk (essentially attempting to beat the market return based on belief, information or frankly luck). The market return is literally the market average return. This assumes that you were invested at the start of the year. If you invested towards the end of April your “loss” would be worse.

Realisation about Loss

However what is a loss? In essence a loss is only realised when you sell your investment for less than the price you paid for it, which might happen due to changing circumstances, but should not happen within a financial plan.

Part of my role is to help clients minimise their mistakes. One would be to sell at the bottom – to panic and “get out” once markets have fallen (this would be called “realising a loss” – ie making it real). It is tempting to do so, but unwise unless your circumstances have genuinely changed.

Risk and Diversification

However all portfolios are diversified across a range of assets, so you aren’t purely in the FTSE100. Portfolios have a global nature and hold cash, commodities and Bonds. The mix (asset allocation) is the important tool we use to devise a suitable portfolio for you, given your ability to cope with investment risk and also have a context (your financial plan) for your money. This is what we call diversification of risk, but might be better understood as “not holding all your eggs in one basket”.

Yes, the year has been poor for investors, but do not be tempted to seek higher returns, and yes even cash with its dreadful returns was a better option in hindsight. The returns will “feel” and appear worse as statements at 5th April would have exposed the comparative high point in the year. However in the long-term investing rewards those that stick with the plan. There is ample and readily available evidence for this.

Noisy “genuises”

Be mindful that most people will never (or very rarely) talk about their investment losses, but invariably shout from the rooftops about their investment successes. The truth is rather different and much better hidden. This applies to private investors and professionals alike.

Tomorrow I will highlight another mistake that you can avoid and frankly, one that you need to encourage anyone you know to read the piece.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

2015 has been a bad year…. for investors tooDominic2023-12-01T12:19:41+00:00

Investing: Q2 2015

Solomons-financial-advisor-guest-blogger-SW

Q2 – 2015

The second quarter (Q2) saw the domestic equity market fall 2.8% while the market for government bonds fell 2.6% in value. A portfolio composed of 60% equities and 40% bonds finished the quarter 2.6% lower.

Index	1 year	3 years	10 years	Low Point	Greatest Loss
FTSE100	0.2%	9.2%	6.3%	Feb 2009	-39.8%
FTSE Gilts (5-15years)	7.4%	2.1%	5.6%	Dec 2013	-6.7%
60-40 Portfolio	3.2%	6.5%	6.3%	Feb 2009	-20.4%
LIBOR (3 months)	0.6%	0.6%	2.3%
Consumer Price Index	0.3%	1.5%	2.5%

Taking a longer term view, and given a minimum of 7 years for investment, we look for returns from the FTSE 100 Index to lie somewhere between 6.9% and 10.1% per annum. The most recent decade (from 30 June 2005 to 30 June 2015) is characterised by a return of 6.3%, outside of the lower end of our range. That makes good sense when one considers that the starting and ending points in that period coincide with a maturing bull market in 2005 and some volatility today.

Our hypothetical 60-40 portfolio, comprising 60% in the FTSE 100 Index and 40% in the FTSE Gilts (5-15 years) Index, has gained 3.2% over the last 12 months, 6.5% p.a. in the last 3 years and 6.3% p.a. over the 10 year period. Adjusting those figures for inflation gives us a healthy set of real returns of 2.9%., 4.9% p.a., and 3.7% p.a. respectively.

Those positive inflation-adjusted returns are particularly pleasing when we consider that cash investments have, somewhat unusually, lost ground relative to inflation – a result of 6 years of unprecedented monetary easing.

The last year is characterised by a mixed set of results with the US and Japan performing strongly. Meanwhile relatively low returns have been provided by markets in Asia, Europe and developing world.

Steve Williams

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Investing: Q2 2015Dominic2023-12-01T12:20:14+00:00

Blue pill or red? time to decide about The Four Horsemen..

The Four Horsemen

Having recently seen The Renegade Economist film “Four Horsemen” I’m reminded of the moment in the film “The Matrix” where the character Morpheus says “This is your last chance. After this, there is no turning back. You take the blue pill – the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill – you stay in Wonderland and I show you how deep the rabbit-hole goes”. So at the risk of sounding like Morpheus, I’m giving you an opt out, right now. However if you’d like to be exposed to some alternative explanations of how the world works today, why you cannot actually buy the house you now live in and perhaps why you are feeling somewhat fed up with the amount of tax you pay, then perhaps I could encourage you to order or download this film.

Classical Capitalism v Neo Capitalism (not Marxism)

Contrary to some of the press that the film has received (it is a documentary) it is not an irrelevant rant by a bunch of Marxists. Indeed, it seems that anyone with a difference of opinion is currently branded a Marxist at the moment. This film is not anti-capitalism, it is about the form of capitalism that we currently live with. There can be few on planet earth that at some point are not prone to question why there are such huge paradoxes, vast amounts of wasted food and yet there are millions that go to bed hungry and starving. What has this to do with financial planning in Wimbledon? Well the film is engaging and inspirational. Financial planning is about creating the life you want, whilst enjoying and really living it today, this is an optimistic message and approach to life.

Eloi and Morlocks, sleepwalking into debt

I don’t know how much of what is said is true or accurate, but it makes interesting points. I am not a conspiracy theorist, I am a capitalist, yet I do believe that unbridled capitalism is gradually enslaving us all to debt, be it nationally, personally, socially or environmentally… dare I even say… spiritually? You will know that I place a great deal of emphasis in clearing personal debt, including mortgages. This is a slavery that we seem to be walking into in a trance-like, perhaps numb… state… rather like the scene from the 1960 film “The Time Machine” when the Eloi are summoned and enter the domain of the Morlocks. We don’t have the advantage of a time machine, though we do have the advantage of the lessons from history and our own minds. As ever, I welcome the conversation and debate.

So here’s the trailer… its up to you… blue pill or red? over to you..

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Blue pill or red? time to decide about The Four Horsemen..Dominic2023-12-01T12:38:32+00:00

Hoping For Long Term Results

2012: Hope Springs – Frankel

I’m a fan of Meryl Streep – but her latest film “Hope Springs” is not as advertised (in my humble opinion). The radio and tv adverts suggest that this is a hilarious comedy. Whilst it has its comedic moments, this is actually a story of an empty nest couple who have a marriage without intimacy. Weathered by the years it is a well observed, but all-too sugary unveiling of lives built upon functionality, which becomes dysfunctional. This film lands some tough punches, but ducks the really big questions.

At the weekend I was at a family celebration for a 50th wedding anniversary and the week before a 25th. We all probably have a reaction to these “landmarks” however whilst I am very much an advocate that relationships must be worked at in order to thrive, (often the work is hard) there is a degree to which there is a portion of luck involved. For starters, that both desire to want to work at the relationship and perhaps that time is not cut short by events way beyond our control. Luck, it might therefore be acknowledged, however “small” is perhaps a vital ingredient. Turning this to the world of investment, I’m not a fan of “luck” yet often those that have the best stories to tell were frankly, lucky – the sort of luck that does not get repeated regularly. Fund Managers work to get their research to a level where one would observe that perhaps investing is nothing more than a science, yet the truth is that the research is little more than a basis for decisions, not a crystal ball. Interpretation is an art and sometimes they get lucky and sometimes they don’t. Many of them are bright and skilled at what they do, but over the longer term, the “luck” tends to average out as performance reverts to “average”. This is why, my clients are encouraged to take a long-term view of investments, we don’t think that its possible to consistently beat the market (unless you cheat or the market is rigged). As with relationships, the quality is in the effort made to gain understanding, to meet expectations and work together for the same ends.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Hoping For Long Term ResultsDominic2023-12-01T12:22:51+00:00

London Fashion Week – Fashionably Early and Hem Line Investing

2006: The Devil Wears Prada -Frankel

As a financial planner, I’m not one to suggest for a moment that I’m also a fashion expert – except I suppose when it comes to fashionable investments. The London Fashion Week closed yesterday – I don’t really know if it’s my interpretation or whether a week that starts on Friday and ends on a Wednesday is fashionably late, early, unconventional or simply the next big thing….anyhow of one thing you can be sure, fashion is by nature premature – in that this was a show for Autumn/Winter 2012.. after all this is showing what will be stocked later in the year. What I can report is that hem lines look set to be a little above the knee this September. There are some of the more “out there” financial speculators that see this as an indicator of confidence and use this to inform investment decisions. Yes you did just read that here. I don’t know if there is any substance to the suggestion, but as investors tend to have a herd-like mentality (professional and private) it is possible to see that confidence could be contagious in many aspect of life, so why not the markets? After all, inflation will be lower (by mathematical analysis) and we will have gone through what transpires for Europe (though the out workings are likely to be very long-term).

To purists, fashion is designer clothing, to others it is making things that we see and use “cooler” by that read the anything pre-fixed with “i” (ipad, iphone etc). Great businesses will be seeking to ensure that their products and services are as “user-friendly” and “cool” as possible. The Chinese middle and upper classes (it seems George Orwell was right) have an appetite for luxury brands and cannot get enough of them… selling like hot cakes. So although China’s growth and inflation are slowing (which was inevitable) the new land of opportunity is proving to be something of a goldmine for those willing to create one and many will have attended the London Fashion Week.

The direct value of the UK fashion industry is reported to be worth £21bn and its wider contribution in influencing spending in other industries is over £37bn. In the UK the fashion industry is the largest creative sector for employment, with 816,000 jobs. It is about the same size as the food and beverage service industry and telecom industry. The UK is regarded as having world leading fashion colleges, so this is where the story begins. The major export markets for the UK are the USA, Japan, Russia, France, Italy, the Middle East, Hong Kong and China. Of course, much like having a tailor made suit or designer dress, a good financial plan is one that is unique, bespoke and fits you perfectly.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

London Fashion Week – Fashionably Early and Hem Line InvestingDominic2017-01-06T14:40:08+00:00