Q4 2019

Wealth & Finance International - Q4 2019 31 Ten Questions You Should Be Asking Your Investment Manager part of investing is to understand the risks. If you can invest only if you have certainty your investment will go up forever, then either don’t invest or be extraordinarily vigilant regarding false promises. The way capital markets work is that you get long-term rewards because some people are afraid of short-term volatility. Most people know that if they hold an investment, then it will go back up. Global growth has always resulted in growth reflected in asset prices. However, there will be lots of people who can’t stomach a 15% decline in any period of time. Those are the people that give the growth opportunity to others at a discount. That’s the trade-off, the risk and the reward. If you don’t want that trade-off, then you can’t participate in long-term growth. 10. What separates good retail investors from bad retail investors? Based on our experience, there is no correlation between investment results and wealth, social status, or education. Surprisingly, research shows that medical doctors are the worst when it comes to investing. Generalising a bit more, men are much worse investors than women. Apparently, testosterone levels are negatively correlated with investment outcomes. Men are more likely to have extremely high conviction in a small number of stocks, building highly concentrated portfolios – even though that’s almost never effective. Unfortunately, this tendency can also translate to investment professionals, with over-concentration being one of the biggest mistakes in retail investing. Fascinatingly, people who have lost their 401k or trading logins seem to outperform the broader retail market over time. Having bought a sensible basket of stocks, they couldn’t access their account when they were fearful and wanted to trade. This may be among the most important lessons of investing: maintaining discipline in the face of short-term noise will do you a world of good.