I very often feel that, at first, people tend to be sceptical towards investment advisors. They think that our sole purpose is to push the consumer to buy some specific product. I have always recommended to people who have no personal experience so far to pluck up their courage to come and try us out. This is the only way to overcome this fear – financial topics require eye contact and trust. No bank advisor can force the customer into anything: those days are long gone.
If you invest regularly, there is no need to worry about the starting date – you will also benefit from the bear market as the investments come at a bargain price. Seven years ago, rumours started going around about stocks being overpriced. However, if we look at the growth of stock funds over the last few years, no one can say that back then would have been the wrong time to start investing. This October, stock prices dropped, which means that stocks are now cheaper to acquire. If a store has a discount campaign, wouldn’t you rather buy more than sell your own stuff?
It is a fact, or at least has been historically, that every fall is followed by a rise. The question is rather how fast the rise occurs and how fast we can offset the losses that may have been triggered by the price drop. If we had faced the latest global economic crisis with a 50:50 portfolio of stocks and bonds, the portfolio would have lost a quarter of its value in 2008. However, restoring its value would have taken only three years. The bottom line: if you are in the red today, don’t panic and wait for the rise that comes after the fall. The worst thing you can do is lose your nerve and cash out completely during a price drop. This will result in a negative experience that will make restarting your investment plan very complicated. If the high volatility in the market unnerves the customer, the chosen risk strategy is inappropriate and the first thing to do is to remedy this.
We usually recommend people that we should meet up at least once a year to review the performance of the portfolio. This is a smart thing to do also because as people accumulate knowledge over time, they tend to reassess their risk tolerance. When investing in funds, it is sufficient to look at what is happening every now and then as the fund manager will do most of the work for you. When buying individual stocks from the stock exchange, keeping up with financial news is still inevitable unless you are a passive investor who buys a bunch of specific shares and then literally forgets about them. This is a strategy I would not recommend to anyone.
I would not recommend putting all of one’s available money in stocks, even if the investor has high risk tolerance. Risks should be mitigated by holding a portfolio of different products. If people ask for our recommendations, we have a set of model portfolios with different risk levels for their consideration. It is also not advisable to invest all of your disposable resources, forgetting the necessary emergency buffer. Of course, it is possible to suspend investments or sell some assets should tough times arrive but this does usually not contribute towards the initial investment goals.