What did we learn in 2020?
Our views were mostly reinforced. Have a portfolio built for your circumstances and if you have a plan, stick with it!
The following chart of the Australian sharemarket speaks for itself. Large and unexpected falls are never welcome, but riding them out remains the best course of action. We may feel panic and revulsion in the moment, but if you press the exit button, you’re liable to miss a turnaround that can emerge much more quickly than expected.
As we hopefully illustrated by the message we presented in this video during the worst of the falls.
Awareness and Self Care
Before we go any further, we’d like to remind you all to take care over the weeks ahead.
We know people like to get into the garden over the holidays. Maybe doing jobs they’ve been putting off. Our client base generally skews a little older. Some of us may have lost a step. Sometimes we don’t like to admit that, but the quicker we come to accept our limitations, the safer we’ll be.
On more than one occasion in recent client meetings, it has been relayed to us that one partner (we won’t mention the gender) decided to pull out the ladder and start chopping bushes or trees. On these occasions, the amateur arborists both had near misses. They took a tumble which thankfully only ended with very minor injuries and dented pride.
We raise this because we also help clients with their insurance. Last year we had a client who also took his chances up a ladder cleaning gutters. It didn’t end so well. Down he tumbled. Cracked vertebrae. Ongoing pain dulled with painkillers. Insurance claim. Still not back to full functionality. As advocates of insurance, we’re glad he was covered, but we wish he didn’t have to make the claim. And we know he thinks the same. Much better to not fall from a ladder in the first place!
The client, who lives in an east coast capital city, recently relayed more about his accident day to us. The thing that really stuck out was what he found when he arrived at the hospital. He wasn’t the only one who’d fallen from a ladder that day. There were four other men who’d also had big falls! All with serious neck or back injuries, some also had other bone breaks and bodily trauma. And we will note, it’s not always just middle aged or older men. The most badly injured person on this day was in his early 20’s. He had an unstable spine fracture and was extremely lucky not to be paralysed.
There might be a temptation to clean gutters or trim trees over the holidays, but maybe just wait, be safe, and hire the professionals to do it.
Dare we say, much like your portfolio!
What’s Ahead in 2021?
First let’s disavow ourselves from placing any faith in those making predictions about 2021. Very few (none) saw a global pandemic along with historic sharemarket falls and recoveries. The biggest influences on markets for a little while will likely remain government stimulus and accommodative central bank policy. And we know, risk isn’t what someone forecasts, it’s what we can’t see.
There will always be unforeseen hiccups. As always, best to remain balanced and diversified.
As the year rounded out, we had another reminder the media don’t always have our best interests at heart. Australian Financial Review (AFR) columnist Joe Aston is currently defending a defamation suit from Elaine Stead, former managing director of venture capital of failed fund manager Blue Sky Alternative Investments.
While it’s a complicated saga itself, we’ll just stick to a small point made when Aston was under cross examination. Questioned about AFR’s ‘Street Talk’ column which had quoted bankers spruiking a potential float of an online wine retailer at $300 million, Aston was quite frank. From The Australian:
He said The Fin’s Street Talk column was “obviously a column where people prospectively assent to generate momentum for IPOs”.
In other words, hyping investments up to get investors acting on impulse. And it’s not just AFR who do it. Across the media it’s an ongoing practice. Reporters don’t just stumble across investment opportunities to write about. Stories are repeatedly pushed at them and when they cover the story, they don’t write in the measured tone they should. They often use the hyped words of the promoter.
It’s most unfortunate AFR promote and hype up speculative nonsense because they also have a handful of reporters who’ve done a good job rooting out and exposing frauds. You might say this allows them to wash their hands of their initial promotions by later swooping in and highlighting danger or forensically examining the wreckage when an investment blows up.
Our Best of 2020
Pirate Fund Hits the Rocks: What we were just talking about. A hyped investment blows up. Journalists and financial advisers should have known better than to promote or put clients into it.
Walking into The Spider’s Web: Being defrauded is a traumatic event. Who is most likely to find themselves a victim?
Stopping Your Clock: Despite what many people believe, investing isn’t really an intellectual pursuit and skills in one profession don’t always translate to being an astute investor.
Lawyers & Superannuation Insurance Claims: There has been a concerning practice of the legal profession offering to ‘help’ with superannuation insurance claims, only for those involved to clip a large amount of a payout for routine work.
Heirlooms: Inherited a large financial sum that is concentrated in a single investment? Beware the emotional traps you’ll likely encounter.
Stories & Evidence: There have been many amazing stories in professional cycling, few have withstood scrutiny. It’s a lesson we can apply to investing.
We also recently soft launched a podcast. We think this is an incredibly valuable episode you may like to listen to over the holidays or even share with someone who may need to hear it. We are very tired of seeing investors losing their life savings to fraudulent behaviour, so hopefully it goes some way to making more investors aware of what to look out for.
Other interesting stories to read over the holidays
Meet the Woman Teaching the Psychology of Survival: Physical wellbeing is critical in wilderness rescues, but an Australian woman is turning attention to psychological wellbeing.
Number Fever: The Pepsi Contest that Became a Deadly Fiasco: A marketing stunt promised Philippine Pepsi drinkers a chance at a million pesos. But an error at a bottling plant led to 600,000 winners.
How the Donut King went from rags to riches – twice: Cambodian refugee Ted Ngoy made a fortune in doughnuts then lost it all to gambling.
The Collector’s Vision: Co-founder of Dimensional Fund Advisers, David Booth, has assembled a stunning collection of art on his Austin, Texas estate. When he’s gone, he wants to share it with the public.