The world is changing fast and to keep up you need local knowledge with global context.
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By Aidan Freswick*
Investors have been given every reason this year to want to bury their heads in the sand as the fallout from the pandemic and war in Europe have set markets ajitter. After hoping the start of 2022 would be a time to reset and move forward after two years of the pandemic, the first half of the year has seen markets take strain as the global recovery stalled.
Bad news is never welcome, especially when it means a decline in fortunes. However, trying to hide from this reality and simply hoping for the best is hardly a sensible reaction. Yet, that is a natural reaction if you fear the markets.
Just to be clear: I’m not suggesting that you make wholesale changes to your investment strategy. We all know that panic selling when markets are in turmoil is more likely to result in value destruction than recovery and is certainly not a smart investor decision.
The good news is that you don’t have to try figure this out all on your own. In fact, research shows that investors who work with a financial advisor typically achieve better returns.
Apart from the gains in real returns that you achieve, you also gain a greater understanding of how your investment strategy is playing out and with that you gain greater peace of mind.
Here are three ways that getting professional advice can help you to go from fearing the markets to unlocking new opportunities.
A voice of reason
A financial advisor is more than someone who simply sells you an investment ‘product’. This may have been the case a few decades back, but properly qualified financial advisors today are highly trained specialists. We are therefore able to craft an investment solution that is specific to your circumstances.
Having a qualified professional who understands markets and cycles and investment strategies is also useful to set your mind at ease. Placing your money and trust in someone is a huge vote of confidence that comes with great responsibility, but also tangible benefits.
If nothing else, your advisor can give you a dispassionate, third-party view that can help put current and future prospects into perspective.
Realistic goal setting
We would all like to double our money or achieve consistent growth, despite the reality being that life-changing short-term gains are few and far between. Your investment strategy, therefore, cannot be based on hopes and prayers that this month’s hot stock is your ticket to financial independence.
When working with a financial advisor, these dreams can be tempered by our investment knowledge and expertise. Together with your advisor, you should identify your financial goals and then develop a strategy that will get you there. Putting this down on paper helps you to see the bigger picture, thereby making your vision more achievable.
Having a well-formulated strategy and well-diversified investment portfolio not only helps you ride out market downturns, but it also helps you avoid any tendency to sell in panic when values drop.
Being mentally prepared
The ability to ignore short-term market noise, even if you can’t see through the noise, is probably the greatest attribute you should look to develop.
Market cycles are precisely that: markets go up and they go down. Not always predictably or when we want them to, but in the absence of prices rising and falling there would be no opportunity to grow your capital. So, it helps to be better prepared mentally for these market swings.
Your advisor is the ideal sounding board, as well as best positioned to advise you on what to expect from the markets. And the top advisors can get you access to new opportunities created by current and future conditions.
Fear of the markets is most often due to a lack of understanding or insight into why markets are moving and where they’re moving to. This can be extremely daunting if you don’t have the knowledge and are inclined to hunker down and hope for the best.
Only you have the power to change your destiny and your future well-being. Burying your head in the sand is certainly not the way to go. So, rather reach out and speak to a professional advisor who can set you at ease and help you see the opportunities instead of only the threats.
- Aidan Freswick, Registered Financial Practitioner™, is an advisor at Brenthurst Tygervalley. [email protected]
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