Politics has exposed how deeply entrenched our beliefs become. Irrespective of facts, truth or common sense, good judgement seems in woefully short-supply. The irony is that a lack of supply may shortly become something we all experience, due the Government’s lack of progress, direction or any plan for the impending self-harm of Brexit.
Fear not, I am not going to discuss Brexit and the impacts of it on your portfolio (the truth is that nobody knows, so why pretend to). What I can speak to is the poor behaviour that investors get lulled into due to their belief system.
The Uncomfortable Truth
We all have a belief system, for some it is a clearly defined religion, for others a life mantra, business process, political persuasion and so on. We all have them. Most of our beliefs are frankly, built upon the flimsiest of evidence, yet we hold onto them as though they are the original stones containing the ten commandments.
The prevailing belief in the world of investment is that common sense, fused with some research and useful information enables some individuals the ability and capacity to beat the market. Please do not misunderstand me. It is possible to out-perform the market; indeed each day half do, the other half don’t. This happens on a daily basis. Some will outperform over the short-term, a quarter, a year, perhaps 3 or even 5. However, the number of investors that can consistently outperform the market year on year is a very small number and one that diminishes each day.
There would be days like these..
It is so difficult to outperform the market consistently that it is impossible to tell if this is mere luck or skill, the statistical chance is so small. Yet at times like these, despite all the evidence, people believe that they are able to correctly predict not only when to not invest and exit “the market” but also to perfectly time a return to it. The other unspoken belief is that this outwits all other investors.
Beware: Men in suits
Despite what all the marketing you see by fund managers and their impressive statistics, beating the market is not easy to achieve. Some will ignore this advice because of a belief that it is “utter nonsense” – the mere inference that what they believe is wrong is too much to cope with. Others will take the view that this time is different, we can see the storm. This time is different – just like every other time. In other words, it is no different at all. May I remind you that everyone has a 100% track record of correct decisions when it comes to hindsight…yes we all saw the dotcom, the credit crunch and the subsequent bull runs….
The more you attempt to manipulate reality to suit your version of the future, the more you will end up attempting to correct the mistakes of the past in the future. It will become your new present reality, living with the discomforting truths that you simply would not face and continue to deny. Denial is an incredibly powerful force and leads to all manner of woes.
However, if you really are not content to live with a globally diversified portfolio of the worlds businesses (equities) mixed with some of the plodding IOUs (fixed income) from the more stable Governments and businesses on earth, then feel free to take on the world.
If you want returns without “risk” you are looking in the wrong places, always. Life is a risk, most, if not all of your decisions contain risk, you have merely formed a system of beliefs around them that enable you to cope with those risks and see them differently. We all do.
Select your vices carefully…
Your portfolio is designed with decades in mind, not days – at least not measurement in the next 30, 90 or 365. It is time to ask yourself what you believe. Be warned, we have often been asked to believe lies. A topical reminder comes in the form of the new film “Vice” starring Christian Bale as Dick Cheney. He and his sidekick, George W Bush, convinced our Prime Minister who subsequently convinced our Parliament that they had “evidence” about weapons of mass destruction in Iraq. Sadly this duplicity resulted in thousands of lost lives, the vast majority of which were “innocent” born in the wrong place at the wrong time. We continue to live with and pay for those mistakes….
The one thing I can predict is that if you do see the film, I imagine that your views about Dick Cheney and your beliefs will probably not change – whatever your political persuasion or will you perhaps disarm me of mine?
Here is the trailer for the film “Vice” which is currently playing at cinemas.
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 email@example.com
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