Richie Mcaw delivered probably the best performing All Backs team, possibly sports team we have ever seen. We sometimes forget that in 2007, the All Blacks had one of their worst defeats in a rugby world cup under his leadership. The public wanted heads to roll. Luckily the rugby powers didn’t listen. Instead, they focused on longer term development and results that would come from the learnings of that loss.
How does this relate to investments? Well, investing into different assets requires different timeframes to achieve expectations. If you are after real growth, then you need to invest strategically and give them time to grow. Short volatility may bring negative performance. Be patient, you will be rewarded in the long term.
In recent times we have seen interest rates falling. This has been great for borrowers but not so much for savers and investors. As a result, I am receiving regular phone calls asking for better returns than what is on offer at the banks.
It is great that people are seeking advice about what to do. I thought I would share an example recently where investors have focused on immediate returns and overlooked what they really wanted to achieve.
My client is about to come into some funds and along with their Kiwisaver and an existing portfolio have a reasonable level of assets with more coming down the line. This client wanted to know what they could do to achieve a better return. One of their goals was to buy an asset in the next two years. I could tell by the way they were talking that it is likely to be sooner than this. The funds are already available. I asked why they wanted to take additional risk with those funds when they could achieve what they wanted right now? There are some other long term goals that I am working on with them, however, they agreed, as much as she didn’t like to, that using a savings account was the best option for now.
Investing should never be about chasing returns. Focusing on returns can see you lose sight of what is important. Even focusing on returns over the long term can see you take unnecessary risk. There are plenty of fund managers that can report outstanding performance in the short term. When you look under the hood you can see why. We have recently seen the failure of one fund manager that advertised based on their returns.
Focus on you and your goals, and look at what you need to achieve them, rather than what you might be missing out on.
- Posted by Isbister
- On January 5, 2020