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Missile strikes shouldn't impact investor portfolios

Glenn Freeman  |  16 Apr 2018Text size  Decrease  Increase  |  
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As news of the weekend's Syrian missile strike by the US and its British and French allies permeates global news outlets, it's timely to remind investors of sticking to a plan and avoiding knee-jerk reaction.

While Australian military forces had no direct involvement in the operation--which had been foreshadowed in the days ahead, partly by tweets from US President Donald Trump--Australia's Prime Minister Malcolm Turnbull supported it.

"The use of chemical weapons by anyone, anywhere, under any circumstances is illegal and utterly reprehensible. The Assad regime must not be allowed to commit such crimes with impunity," Turnbull said in a statement issued on Saturday.

While the specifics of this latest event is different, the fundamentals around sentiment and reaction--including from increasingly inter-connected global financial markets--is the same.

Though you've likely read similar viewpoints from Morningstar analysts and our senior leadership before, the advice is as valid now as ever.

Turning to the example of Brexit--a very different kind of event that is much more far-reaching in economic terms--Dan Kemp, head of Morningstar Investment Management in the UK said: Investors shouldn't react too quickly but instead should do their research to really uncover the opportunities that this period creates.

"Leave shorting and short-term market movements to the traders and the experts. This is about long-term investment, not short-term reaction," he said in June 2016.
In a later article, he says investors need to suppress the urge to try and predict what second-order effects may flow from such events.

"Even after years of practice, it is humanly awkward to resist the urge of answering questions such as: 'What do you think will happen after Brexit?'; 'What will Donald Trump tweet next?'; or 'Which celebrity will win the next reality TV show?

"The job of an investor is theoretically quite simple. First and foremost, you must determine whether you have a competitive edge that can be exploited and is likely to add value after any fees and taxes.

"If the answer is likely to be yes, you need to be very clear on how this can be achieved on a sustainable and repeatable basis. A well-documented investment process will help articulate this, as even Warren Buffett asserts, "We enjoy the process far more than the proceeds," Kemp says.

Further news analysis to come.

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Glenn Freeman is a Morningstar senior editor, based in Sydney.

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