November 20, 2015 Paula Benson

Let your head rule your investment decisions

SPECIAL FEATUREI’ve been watching the news with a heavy heart lately, as I’m sure the majority of people have.  The terrorist attacks in Paris have been shocking and the imagery of people being killed or injured going about their everyday lives, lives not so dissimilar to our own, really strikes fear in your heart.  We start asking ourselves whether we should start changing the way we live.  Questioning ourselves about attending large events.  Asking ourselves how normal life can go on.

The reality is we really don’t know what tomorrow will bring.  But one thing that I firmly believe is that life does go on.  History has shown us that no matter what terrible event happens in the world, normal life continues, the world keeps on turning.  Being part of a financial planning firm, we see people take hold of this fear and uncertainty in world events and they extend this fear to investment markets.  Sentiments like “markets are going to drop” and “the world’s in crisis, so investments will collapse” come to the surface at times like these.  As I said, nobody knows what tomorrow will bring.

The only thing we can do is look at the past and see how financial markets have previously behaved in times of trouble.  When we look at past investment market performance, we can see bumps in the road connected to various world events but in the long term we really don’t see any lasting impact.  If you are investing in the share market you are investing in the companies that we use on a daily basis.  What happened this week in Paris is horrific, just as the attack on the Twin Towers in New York was horrific and the London Bombings were horrific.  Even so, we are still using electricity each day, buying groceries, filling our cars up with petrol – life’s normal consumption of goods goes on.   The normal life that sustains the investment markets.

It’s my birthday today and being a child of the 70’s I grew up loving reggae music.  Bob Marley has a song called “So Much Trouble In the World”.  He wrote the song in 1979.  Clearly the song was written because, in Bob Marley’s opinion, there was a lot of trouble in the world in 1979.  In some respect I guess not much has changed.  One thing I know for sure though – I wouldn’t want to have let world troubles stop me from investing in the share market in 1979.   $100,000 invested in the industrial index in 1979 would be worth approximately $1.7m today and the dividends would be providing me with an income in excess of $70,000 pa.  World trouble can see you experience a whole range of negative emotions but let your head, not your heart, rule your investment decisions…and long live world peace!

Alison Adams, Business Development Manager

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