Why are you working, saving and investing?
I highly doubt you said, “So I can beat the All Ordinaries index.” What you probably said was something like, “So I can send my kids to university,” or “So I can retire early,” or “So I can take a trip around the world.” And yet some investors’ actions seem to suggest they’re focused on something else: beating the market.
Does it really matter more if you beat a particular index than if you reach your goals? If you happen to accomplish it while reaching your goals, good for you, but beating the market isn’t the kind of goal that matters.
While we are on the subject of focusing on what really matters I personally believe the drive to ‘Self Manage’ Superannuation funds for most is detrimental in many cases to achieving their most important goals.
Back to markets, if we make beating the market our primary focus, it becomes incredibly difficult to behave. Instead of working towards something tangible that aligns with our values, we try to outguess what the market will do next. And that’s the kind of behaviour that can hurt our goals the most.
In some ways, I suspect very few of us can afford to attempt to “beat the market” because it is a costly exercise. It is costly because research shows 70% of professional fund managers cannot beat the market so how can the average punter?
So when you’re tempted to play the game, I suggest you line up your most important goals and keep focused on what is important. Achieving the markets average return will move you closer to achieving them.
Stephen Lowry CFP, DFP, FAIM, 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.