Invest in your Happiness

Investment bliss and happiness can be achieved.

The investment experience does not have to be stress and anxiety-inducing – as long as you are armed with the understanding and logic to provide you proper perspective, context and expectations.

The challenge of being disciplined in volatile markets is no easy footing by any means, but instead of resisting periods of underperformance (which might cause you to abandon a well-engineered investment plan) take a moment to gain perspective and context, then align this to a set of realistic expectations.

Expectation: Risk and Return are related

Volatility is a normal part of investing and when you understand that risk and return are fundamentally related, this should not come as a surprise. With this, you should also understand that by bearing this risk, there is, therefore, a higher expected return to which disciplined investors have been rewarded for time and time again. Conversely, reducing your exposure to market risk will lower your expected return.

Perspective: This too shall pass

Combining the above with a long-term investment horizon gives you a much clearer perspective and can alleviate some of the emotion surrounding periods of market volatility. Exiting the market or making frequent adjustments as a response to market noise can be a stressful exercise. This is often doubled down with the stress of worrying about when to get back in. As humans, we have a natural ‘flight’ instinct, but this can also have an adverse impact on your investment experience, as even missing the one best day in markets can significantly reduce your long-term returns. Allow yourself to embrace a calm and methodical approach to investing, with the perspective of a long-term market performance.

Context: Fortune Telling vs Academics

Now, to put things into context, it is absolutely true that we do not know what the future holds and there will be events that are outside of our control. Long periods of underperformance are disappointing and sure, we would all prefer ‘higher returns.’ However, the history of market returns (see our previous articles) shows us that investing now and with the long term in mind is a proven way to achieve good returns.

Disappointment and regret will diminish if you expect that periods of negative returns will occur at unknown point in times, with a perspective that long term markets do recover and that you will be rewarded, this gives you context with the end result being: investment happiness.

It’s ok not to do this alone, and working closely with a financial advisor who can offer expertise and guidance can help you focus on actions that add value and what you can control:

  • Create an investment plan to fit your needs and risk tolerance.
  • Structure a portfolio along the dimensions of expected returns.
  • Diversify. 
  • Stay disciplined through market ups and downs.

Kelsey Dent (DipFP, ADFP, BA Hons [Bus,Mgt]) is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.

Note: This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly.