Keep Calm and Carry On
You will never reach your destination if you stop and throw stones at every dog that barks.
— Winston Churchill
As Churchill said, we will often face many distractions in our lives. Some of them may cost us a small detour, whilst others could have wide-reaching consequences. COVID-19’s impact on the economy and markets showed investors that stopping to make adjustments (throwing stones) would cause detrimental impact to their money.
Looking back to the unprecedented year of 2020, you can see that it is easy to be overwhelmed by the relentless stream of news - let alone financial news. With the rise of smartphones, social media, and instant messaging services, sometimes it is hard to differentiate fact from fiction.
Even the most experienced investors are not immune to reacting strongly beneath the barrage of information and headlines purporting to be relevant to their financial well-being. These are but a few of the juicy headlines from the early part of the year:
We only hope that people remained steadfast in their investment journey as we head into 2021. Sensational headlines are not new. We must realise that headlines are meant to attract attention and sell news. Thus, we must turn to the news for information, but hopefully not rely too much on it for analysis. Don’t let it question your investment approach just because you feel a little uneasy in your stomach.
Such headlines (like the collection shown below) can evoke feelings of elation or despair. Doing nothing may feel paralysing. Nonetheless, throughout the ups and downs, sticking to your investment plan and not selling in a panic would have you be further along, and closer to your destination.
For example, at the beginning of 2020, if one had put S$100,000 into a diversified basket of global stocks (like the United G Strategic fund we hold for many core portfolios for investors), done nothing and held on, it would have grown to over S$113,000 today - roughly a 13% return.
This is true even with the fact that the start of 2020 was probably one of the worst times to have entered the market.
Markets were at all time highs then - after a good 2019. Then, COVID-19 struck. In the depths of the market plunge in March and April, if anyone said that you would end the year with double digit returns, you might have thought they need to get their head checked.
This simply shows that it is quite impossible to predict what will happen, even if you have thousands of analysts, industry expertise, and supercomputers crunching data for you, like many of the large banks and investment advisors.
When faced with short-term noise, it is easy to lose sight of the potential long-term benefits of staying invested. Adopting a long-term perspective can help change how investors view market volatility and help them look beyond the headlines. The value of a trusted and fiduciary advisor cannot be emphasised enough. Having an appropriate asset allocation in line with your willingness and ability to bear risk is key in helping you avoid giving in to emotion during periods of uncertainty.
However, as with many aspects of life, we can all benefit from a bit of help in reaching our goals. The best athletes in the world work closely with coaches to increase their odds of winning, and many successful professionals rely on the assistance of mentors to help them manage the obstacles that arise during their careers. Why? They understand that the wisdom of an experienced professional, combined with the discipline to forge ahead during challenging times, can keep them on the right track. The right financial advisor can fill this vital role for investors, providing the expertise, perspective, and encouragement to keep you focused on your destination and in your seat when it matters most. Whenever you are faced with uncertainty and an overwhelming array of financial decisions to make, we are here to help you cut through the noise.
There have been many academic studies showing how the value of an advisor extends far beyond just investment results. The Vanguard group quantified the value that an advisor brings to the table is approximately 3%, and produced the diagram below which broadly shows how the best practices in the wealth management space add up to the client's benefit.
Of note, the benefits of behavioural coaching far exceeds that of portfolio allocation and general wealth management – showing that, very often, investors need to be saved from themselves.
(Ref: Vanguard White Papers on Value of Advisor 1, 2, 3).
Having a strong relationship with an advisor can help you be better prepared to live your life through the ups and downs of the market. Research shows that a good advisor brings value far above the fees you pay. 2020 has shown that it can be closer to 13% or more. That’s the value of discipline and perspective.
Keep calm and carry on.
