Written by Tom Stanley, Investment Adviser, 28 October 2021
You will note that markets did see some volatility in September, many of you may have felt this in the form of a slight fall in your KiwiSaver or investment balances – Although this fall was modest, it may have triggered some emotion, as it was the first pull-back since January as stock markets have gone from strength-to-strength through 2021. My core question this month: Is this small pull-back the right place to direct our focus?
As humans we have a tendency to focus on all the wrong things. We fixate on things that don’t matter, and things that we can’t control. Of course, if it doesn’t matter, focusing on it is pointless; and if we can’t control it, focusing on it is futile.
What would happen if instead of trying to focus on everything, we only focused on the things that really mattered that we can also control? For example, we can’t control the markets, but we can control how we react to the markets. We can’t fix global economic problems, but we can tackle our own financial issues.
The sketch above from Carl Richards hits the nail on the head when it comes to where we place our attention. Ultimately, you have to ask the question: “Does this really matter, and do I actually have control?” Based on the answer, you’ll know whether it’s worth your time and energy.
Putting this in context, this thought process was actively used in my days of playing rugby where “control the controllables” was the common catch phrase. An example of ‘controlling the controllables’ in rugby was in my approach to the weather – Yes the weather does matter in rugby, but could I control it? No. Often players I came across would ‘hope’ for, or worry about, what the weather would do on game day. They may have tried rain dances, or prayed to the weather gods for fine weather… fortunately, early on I was coached into realising my time was better spent focusing on my preparation and the game plan, not the weather. The realisation that all the other players had to play in the same conditions focused my attention on my preparation and game plan (things I could control), allowing me to talk scenarios and define my responses regardless of what the weather gods threw at me.
How does rugby (or any sport), and the weather relate to your investments? Well, we have recently fielded questions around some big headlines such as ‘higher than expected inflation’ and ‘reserve banks raising interest rates’ – inflation and interest rates are much like the ‘weather’ for your investments. And yes, like the weather in rugby, they do matter, but can you control them? No. But you can make informed decisions for the current ‘investment climate’. Instead of focusing on the headlines and price action, the better questions to ask are “Am I comfortable with the direction I have charted?” and “should I review my current direction now?”
These are big questions, and the answers often not so simple. Our job is to help you work out your investment direction and reduce the noise so you can keep your FOCUS.
If you have any questions or queries, contact Amicus today. We are here if you would like to talk investments, KiwiSaver, planning or retirement.