“Me: it isn’t about short-term gains but long-term sustainable returns

Michael: even though I do keep an eye on the prize, doesn’t mean I can’t appreciate every play of the game.”

The above was an extract of my email exchange with a client of ours and defines what we mean when we say ‘Enjoy the journey.’ If you want to appreciate where you are fully, it’s essential to enjoy how you got there.  The good and the bad.

Michael and I discussed the recent market performance, which, in Ben Wattam’s words, has been and will continue to be bumpy.  We should expect short, sharp market corrections now and again.  The recent volatility is arguably the result of a market sell-off due to slightly higher than expected inflation data.  Central banks appear to be entirely apathetic towards inflation right now instead focussing their attention on (possibly negative) interest rates and GDP growth.  In their view, inflation running hot for a period is a necessary side-effect of overall recovery. 

Despite Michael drawing a pension equating to 5% of his fund value, his pension fund has increased in size as we benefit from the current market recovery opportunities.  A crucial part of his planning was: reassessing his attitude to risk, correcting the asset allocation as we worked through the assets we inherited, then trading actively throughout the recovery.  His portfolio is markedly different now to what it was a year ago.  If we map his performance of where he would have been to where he is now, the difference is stark.

I am a big believer in focusing on long-term objectives and changing your short-term tactics quickly.  It is easy to change when objectives change.  It is a different matter when they aren’t working.  How long do you give a failing strategy?  This is the skillset you are investing in as a client when you select an investment manager and financial planner.  We believe these two roles should be tightly linked.

I wonder how many times other advisers have said to clients to not look at the short-term numbers as these can distract you from the long term objectives.  Indeed, looking every day may almost blind you to long-term trends, but I love the quote of enjoying every play in the game: the good and the bad.

Another of my favourite quotes from a client was:

“I like to see my advisers in adversity.  You see what they are made of when it isn’t going their way.” From a client perspective, if I have a long term relationship with an adviser, it is always vital to see when their back is against the wall to understand how they will advise you under pressure.  If they act well, they will continue; if not, you need to question their desire to see you succeed. 

While we cannot expect our advisers to be robots, a reliable approach to problem-solving under pressure is a must for me—no hiding when the going gets tough and no ego anchoring them to ineffective tactics or positions. 

For me, this loops back to the above of both appreciating the plays and the challenge of changing when you do not have things your way. 

 

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