Your Quarterly E-Zine
Edition 11 • December 2019

This website contains the latest edition of Forsyth Barr Focus, a quarterly on-line magazine written by senior members of Forsyth Barr's investment team.

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A recent global survey of investors[1] revealed that few were able to make the connection between their investment behaviour and their investment success.

When those investors were asked if putting their emotions aside could better enable them to meet their investment goals, only 6.4% of the nearly 6,000 respondents answered “yes.”

It’s sometimes the case that we over-estimate our personal capabilities (financial or otherwise), with emotion strongly influencing our behaviour at key decision points in our lives. In the sporting world, athletes train both their bodies and minds to manage the emotional stress that can occur in the heat of competition, when stress and opportunity meet. When it comes to investing money, the concept of training for financial fitness also has its merits.

This year for Money Week, the Commission for Financial Literacy and Retirement Income has developed the Financial Fitness Check-Up – “a dynamic tool to help Kiwis break down their money calorie count and get into peak financial shape.” We think that in many respects, investors need to put themselves through a similar fitness regime, to ensure that the goals they set for themselves are achieved without compromising their overall health and well-being.

So, what might an investment fitness training regime involve?

The first, and perhaps most important factor, is investment self-awareness. If you’ve accumulated savings available for investment, you need to be honest in your understanding what that money can potentially do for you, over what time period. Understanding what investment risk is and how this relates to your behaviours and attitudes toward life in general, is key.

For example, it’s not uncommon for investors to develop extravagant expectations of future investment returns while at the same time being deeply worried about the prospect of capital loss. Such anxiety is surely not healthy, even if quite common. The more extreme this worry becomes, the more speculative people’s investment behaviour inevitably becomes.

The study referred to above asked investors what level of return above inflation they believed they needed to achieve their investment goals. On average, they said 9%. This may well be a realistic assessment of their future financial needs, based on their existing investment capital, but how likely is that investment outcome in reality?

Factoring in an average long-term inflation rate of 4.2% (2.2% in the case of New Zealand[2]), the study suggests investors expect annual returns of 13.2%, whereas the long-term average return of the MSCI index of global shares is only 9.9%. The disconnect between aspiration and reality suggests the lack of a plan.

Lewis Carroll once famously remarked “if you don't know where you are going, any road will get you there.” Of note, when asked, almost 60% of investors worldwide said they have no financial goals, nearly 70% said they have no plan, and close to 80% said they go on gut instinct when making investment decisions.

Olympic Gold Medalist, World Champion and Forsyth Barr Registered Investment Adviser Hamish Bond said[3], when asked about the importance of goals “I guess my goals just kept getting higher and higher the further I progressed [in rowing]. I made the junior team and that was the goal. Then the goal was making the senior team, then going for the pinnacle, competing at the Olympics.”

As Hamish will attest, reaching the pinnacle requires not only fitness, but clarity of purpose and dedication to achieving defined goals. As has often been observed, success is 99% perspiration and only 1% inspiration.

This Money Week, perhaps it’s time to arrange an investment fitness check-up with your local Forsyth Barr Investment Adviser. They’ll help you focus on your investment destination and design a clear path to get you there.

[1] Global Survey Of Financial Advisers, 2014 - Natixis Global Asset Management – July 2014

[2] – average CPI inflation, 1990 to 2010


By Gordon Noble-Campbell
Director, Private Client Services

This article was first published in October 2014