Last week, the story which dominated the headlines and news channels was Christine Holgate, CEO of Australia Post. She rewarded seniors managers with watches.
Not just any watches, but $5,000 Cartier watches. Not being a watch person I wouldn’t be able to tell the difference between a Seiko and a Cartier watch.
It caused a shit storm in the media, with every news outlet around the country jumping on the bandwagon as they do. Everyone sprouting their own opinion.
All over $20,000 in watches. With the pollies jumping on board, using this as a diversion to any issues they were under the pump for. They were out for blood.
Even Prime Minister Scott Morrison saying “it is disgraceful and not on”.
Whether you agree or disagree with what Christine Holgate did was ok or not. In the current environment, it wasn’t a smart decision or a great look.
It did make for a helluva front page though! You might be asking where’s your Cartier watch!⌚
Like many, you might be someone who let’s emotion take over and jumped on the bandwagon. It’s the way a lot of people make decisions about the way they invest. Jump on the latest information without all the facts and without putting things into context.
Parking emotion to one side for the moment, hard I know…but stay with me here, there’s a valuable lesson to be learnt.
So, let’s break this down a little with the facts.
The total cost of the watches were approximately $20,000.
Staff at Australia Post were awarded approximately $97 million in cash bonuses.
No one brought up the cash bonuses paid! That one didn’t make the headlines…
So, you add the watches to the bonuses and we’re looking at a .02% increase.
Salaries in 2019 amounted to approx $3 billion.
And yet, the whole of Australia is in an uproar over $20,000 in watches. It’s amazing how a lot of tabloid headlines can influence one’s thinking.
On one hand, you have your head telling you, yeah, but it’s $5,000 watches. The other side telling you it’s only .02% of the total bonuses.
While if Christine had not gifted the watches and instead added it to their cash bonuses. It’ll be unlikely we’d be having this discussion.
It’s a storm in a teacup, all over a .02% increase in bonuses. I’m sure we have more pressing issues to be worried about.
And here’s the lesson…
As investors, your emotions impact your decision-making abilities all the time. Investors take the information. Sometimes without widening their view, and make rash/uninformed decisions.
Which means when it comes to investing investors are prone to buy high and sell low, acting on emotion. The fear of losing it all kicks in.
While you cannot control what investment markets do. You have control over whether you stay the course or not. And here’s where having a well-constructed roadmap and a good adviser is worth every cent.
An advisors value is largely in helping clients make the right decisions. Most commonly referred to as Behavioural Finance. Where personal finance meets psychology. Research has shown this can quite easily add 1-5% pa to your investment return over time.
When COVID-19 hit earlier this year, we had clients that wanted to go to 100% to cash in March 2020. And these clients managed through the Global Financial Crisis.
Our discussions focused on looking through the haze and looking at the facts. They had the right risk levels for their circumstances. They had enough cash to fund income payments for at least the next 2-3 years. Passive income was being generated inside the portfolio.
We even posed the question, “if you were to sell out, when would you know is the right time to buy back in?”. A question no one can answer with absolute certainty.
We made the decision to stay the course. Keeping emotions out of the decision-making process and focus on the facts at hand.
However, we’ve seen many people without advisers. Cash up through March 2020 and still to this day as investment markets recovered have not got back in. Sure, we can’t stop the wave, but a good adviser can help you ride the wave.
But what if you made the decision to cash in your chips?
By way of example. Imagine for a moment, you choose to cash in your portfolio on March 23rd 2020 when the S&P ASX200 was 4546. The reason we use the bottom is investors historically are poor at timing investment markets.
Just three days later the ASX200 was at 5113, 12.47% higher. If you had a portfolio worth $1,000,000 100% invested in Australian Shares, you would have missed a $124,700 bounce. Think about that for a minute, just three days!
In reality, most have a more widely spread investment portfolio, but you get the picture.
When investment cycles are feeling like a wild rollercoaster ride. The logical decision is to stay the course through scary markets. Although, in reality, it is rather difficult.
If you were one who cashed up. You can’t sit there and dwell on the decision. It’s what you do from here which is going to make the difference. Take the offence approach and put a plan in place to get you back on track.
If you invest based on your emotions, the research proves it’s hard to do well.
The story of Christine is a great investment lesson. If you jumped on board the bandwagon. Jumped to conclusions without zooming out and looking at the facts and putting them into context. Maybe, you’d better consider a career in journalism.
Sure, you can’t just flick a switch and change overnight. But having an accountability partner, like a good financial planner, can help you navigate your way through scary markets. Help you to zoom out and look at the facts, and whether staying the course is right for you.
If you on the path to a self-funded retirement. Do you want to know not only how to invest your money prudently? But to understand how you can use your wealth to live your best life free from the worry of running out of money in retirement? It’s time to book a call here to find out how>>
Here’s to living your best life!
Glenn Doherty – CFP – Money Mentor | Taking the stress out of planning your self-funded retirement | Founder of Jigsaw Private Wealth
We conduct virtual client meetings!
Advice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Exelsuper Advice Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at July 2020. This is an online information blog. It does not imply an offering of securities.