Since my last blog post a number of notable events have occurred. The Bachelor has narrowed his potential life partner down to 5 candidates, the Hot Plate has announced a winner destined for ultimate foodie and endorsements glory, and last, but not least, we have all survived the market sell off a couple of weeks ago that sparked the headline grabbing hashtags of #blackmonday and #ChinaMeltdown.
When markets experience a downturn like the other week, the BetaShares team watches the trusty IRESS trading screens with interest in anticipation of the Aussie market sell off. What we saw though, was some selling, but more surprisingly, we saw large volumes of buying into our Exchange Traded Products – the bulls viewing the event as a buying opportunity for our Geared Australian Equity hedge fund (GEAR) and BetaShares Geared U.S. Equity hedge fund (GGUS), whilst the bears saw the correction as a sign of things to come and placed a hedge in their portfolios using our Australian Bear (BEAR) and Strong Bear Hedge Funds (BBOZ) and US Strong Bear Hedge Fund (BBUS).
Given that we have not experienced this kind of market scenario in a while, I was curious to hear how my financial adviser clients were handling the calls from panicked/angry/concerned investors. I was amazed to hear that this was not the case. The consensus was that most clients had been calm and saw the dip as a buying opportunity. Unable to hide my surprise, I was enlightened by one particular adviser who explained to me that after the GFC, he found it imperative to re- educate his clients about the importance of focusing on the ‘big picture’. He found that too many clients were waking up to Kochie in the morning discussing the S&P/ASX 200 being two percentage points up or down from the day before, and calling him to ask why it was the case. He reminded them that their Statement of Advice didn’t outline how he was going to prevent their share portfolios from fluctuating daily, but detailed how he was going to help them achieve their financial goals – whether that was to ensure they had enough money to retire comfortably, build a diversified share portfolio or help their kids get their feet into the property market. He stopped headlining his client reviews with the percentage return from their portfolios or what the markets did in this period, instead focusing on whether they were still on the right track to achieving the goals set.
This adviser’s anecdote struck a chord with me, being a reminder of the importance of taking a long term view on investing. We often focus on daily market fluctuations and base our decisions on these, instead of taking our investment strategies into consideration. No matter what anyone says, nobody can forecast what will happen with the markets (if your crystal ball works, I’m more than happy to take any recommendations though!). At the end of the day we should follow the example of the Adviser I mention and make sure that we focus on the forest, not the individual trees.