Christine St Anne: The market volatility continues to concern many investors. These concerns could lead to some common investment traps. To overcome these traps, I'm joined by Securitor's, Matt Englund.
Matt Englund: Thanks for the chance to chat.
St Anne: Matt, as head of an advice group, what are the key concerns that are raised by your clients in this environment?
Englund: There are some things that we're seeing at the moment with our clients that are universal and always stand, and there are some things that we're seeing that are specific to the market at the moment. The issues that always stand are the issues associated with do I spend and enjoy for today or do I invest and save for tomorrow. This concept of instant gratification; do I make sure that my future is set up appropriately or do I spend today and enjoy the lifestyle that I'm looking for today. It's an issue that we face across all time and that's something that we face today, it's universal.
The issues associated with the more current investing climate are two. The first is the ability to effectively contextualize or understand what it is that's going on. So, when I read the paper, when I see what's going on in the news, what does it mean? Not what does it mean in terms of the economy of Greece or Spain or Portugal or the EU or the U.S. More broadly, what does it mean for me? What does it mean for me and for my future? What does it mean for me and my investments today? That's the first thing.
The second thing that is about the environment specifically today is this concept of confidence. People have lost confidence in the fundamentals. People have lost confidence in this concept of long-term investing. You can understand why, but what hasn't changed, what must remain at the forefront of thinking here is that long-term shares outperform. Long-term cash is not a good investment in isolation. Long-term you shouldn't be chasing just yield. Yes, there is a period of time in the cycle and that period of time is now where you do get good returns from cash or from the yield that comes off our big four banks, but long-term you need capital growth to have a sustainable future and by consequence you need to be invested in the markets and a return to confidence there will help deal with that issue.
St Anne: So, Matt, do you think that these concerns lead to some common mistakes that investors make when it comes to managing their investments?
Englund: Yeah, I think investors at the moment are making the mistake of being defensive at a point in time where opportunities are almost boundless. So when you think about volatility and the capital value of your investments, where at short-term that's not an issue. If I'm a long-term investor, why do I mind if the value of my investment goes up and down in the short-term if I know the fundamentals are there and that the business is sound that I'm investing in.
So people at the moment are reacting to short-term news. The market as a whole is reacting to short-term news. Even if there is an issue in Europe, even if there is an issue in terms of growth in the U.S. or in China, long-term we know that equity investors will seek and will find a good quality return. So people are reacting short-term to issues that they should see through and in fact should see as a buying opportunity.
St Anne: So, Matt, how can I overcome these mistakes?
Englund: Great question. There are two ways people can overcome these issues. The first one is to seek good quality financial advice. Having somebody by your side, a coach if you will, a money mentor to work with you through this process is incredibly important, and will give you the confidence that you're looking for.
The second way they can do it is be educated. Seek information from a wide range of sources to make sure that you understand fully what it is that you're seeing on the news, or that you're reading in the paper, or that you're hearing from your friends. When you start to understand the fundamentals and you think long-term about what it is that investing is there for, how you should focus on your long-term goals, a good quality financial advisor and being well educated yourself will help guide you through this period of instability.
St Anne: Matt, we're facing unprecedented volatility, is there any way investors can actually control their portfolio?
Englund: If I think about being able to control your portfolio, I take a slightly different view on it. Control the outcomes, control your future, focus less on the volatility of the value of your investments today and more on your long-term goals and a good quality of financial advisor partnering with a financial coach will help you do that.
Think not so much about what's going on in your portfolio today, but rather think much longer term about what it is that, that portfolio is designed to help you achieve. So donï¿½t focus on today, think about today as an opportunity, use volatility as an opportunity to help you achieve the goals that you set out to achieve when you first started investing.
St Anne: Matt, thanks so much for your insights today.
Englund: Thanks for your time.