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When it comes to investing…..are we our own worst enemy?

Working in the resources industry can be tough. Remote locations, long hours and time away from family and friends can take its toll. The experience can of course be rewarding, particularly when it comes to income and the ability to plan for the future. However, it’s easy to become distracted especially when it comes to investing.
Whether it be buying your first home, or in investment property, starting a share portfolio or investing your super, we are all at the mercy of the markets. 
Property markets down south are enduring a bit of a downturn at the moment, interest rates are low so money in the bank isn’t earning much and share markets around the world have been up and down. The fact is, markets are unpredictable.
Just look at commodities. Some of the biggest companies in the world have trouble predicting coal, iron ore and oil prices. Trying to predict the ups and downs is often impossible. The key is to remove emotion from your decision making process. Investors tend to get greedy and “bullet proof” in rising markets and fearful in falling markets.
One of the world’s largest investment fund managers, Vanguard, has just released a study of returns across 600 Australian investment funds and found that about 90% of the return is as a result of the selection of the underlying asset i.e. where the money is invested. The other 10% is attributable to an investor trying to time markets…….i.e. buy low and sell high. History shows that those who ignore the ups and downs and simply focus on choosing the right assets over time will enjoy a much better return.
A perfect example of this can be found in our own local share market. The Australian share market hit a high in late August last year and then we had a series of “events” such as the on going Brexit debacle, the US/China trade war and fluctuating commodity prices. This caused markets to drop, investor fear set in and markets dropped further and eventually levelled out just prior to Christmas. Since then, our local market has been recovering and is up about 10% for the month.
Even the best fund managers in the world can’t predict the ups and downs, so what chance have we got as investors?
One of the best ways to smooth out the bumpy ride, particularly when it comes to your superannuation, is to diversity across high quality assets. Using funds that invest across different asset types and sticking to your investment strategy over the long term will allow you to not get in the way of your own success.


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