My old soccer coach was a wise man. He had a saying “when in doubt, kick it out”.
He would always say if you’re under stress and someone’s bearing down on you at 100 miles an hour and you need to make a quick decision, if the passing option isn’t clear, if there’s risk of an interception or a miskick – just kick it out.
Not just a soft kick either. Preferably boot it out as hard as you can. The method to his madness allowed you (and the team) to regroup, take time to set your formation and get ready to go again. Sure you might have lost possession and some ground but you’re not behind on the scoreboard and you’re still in the game. I often think of this in the context of investing. Just like soccer, investing is full of high emotion and decision making is too often clouded by stress.
When you’re investing in the share market and your portfolio drops 4% in one day, or 30% over one year it’s not uncommon to lose your head and start to question your investment game plan. Common sense might not always prevail and a knee jerk reaction can quickly follow.
The level headed question we need to be asking ourselves is, “is this recent correction a temporary setback or is there something more serious going on that requires a change in our game plan?” In times of nervousness and high emotion it’s often good to reflect and put things in context.
If we think about what’s happening with a clear mind, we could view a share price reduction as a great opportunity to accumulate more shares at attractive prices and for retirees this might highlight the importance of maintaining cash and other defensive assets in our investment portfolios to ensure we don’t have to sell and take a loss. The biggest challenge we all face in times of high emotion and stress is whether we have the presence of mind to see this not as a crisis but rather as an opportunity. Warren Buffet sums it up well by saying “be fearful when others are greedy and greedy when others are fearful”.
Coming back to my soccer coach again (who’s as equally wise as Warren Buffet), when share markets correct and it feels like the opposition is bearing down on us and we need to make a quick decision under stress, kick the ball out! Take a deep breath, rally the troops and get back on with the game plan. Easier said than done I know. That’s why we all need a coach or an adviser to remind us of the bigger picture. If you find yourself thinking, should I be doing something different and be changing my investments we encourage you to contact your adviser to regroup and talk about your investment game plan.
Are you ready to kick something out?
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Article by Gary Winwood-Smith | Partner & Senior Financial Planner
General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.