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Be a better investor in 2019

Daniel Lane

Daniel Lane - Fidelity Personal Investing

There are a few things I want to get better at next year like cooking and making it to the gym. Luckily, it’s easy for me to measure how I’m getting on with these goals because simply, if I don the apron a bit more and jump on the treadmill I know I’m probably one up on 2018. I’ll let you know how I get on - the proof is in the pithivier, as it were.

I’ve also decided I want to be a better investor in 2019 but I don’t think I can take the same approach. In fact, it’s the only resolution I’ve made where I can’t completely control the outcome of my actions, instead relying on purely the actions themselves.

I know a lot of investors will have the same intentions at the turn of the year but I think maybe we give ourselves the wrong target. We can’t control the market but we should do our best to control our actions. That often means addressing our own behavioural biases and understanding our personal tendencies to overreact, ahead of any market movements that might force us to make bad decisions.

Here are a few popular sticking points 2018 threw up and how we can tackle them head on in the new year:

Volatility

Big market swings have been a big part of 2018 on the back of a range of political issues that will hopefully see their own resolutions next year. Things might have looked rockier than normal but we need to remember - markets go up and down and the inefficiencies on either side give us opportunity to buy and sell.

If you start to see volatility as one concept, rather than good and bad, it makes a big difference. Of course we like it when the graphs move up the page but if that was all we saw we’d never get a cheap entry point or be able to take advantage of other people’s fear. If you can settle yourself before others when things get bumpy you give yourself a much better chance of making a good decision. 

And remember, a bit of cash on stand by to pick up some oversold shares can help but too much cash on the side lines means missing out on the overall compounding long-term investing is all about.

Framing bias

Short-term events narrow our field of view so much that we tend to ignore the bigger picture - Brexit and US-China trade wars have done that in spades this year. Really though, focusing on long-term investment themes like global demographic change and technology is more important. It certainly feels like we should be investing to meet what’s happening in the world now but it rarely works. Good investing is about incremental growth aligned to solid fundamentals, not taking a punt on a hunch. We will soon look back at the political turmoil today the same way we look back at every period in history - mostly with a realisation that we didn’t really have a handle on it. Investing on that basis is a fruitless task.

What now-ism

A lot of the questions I’ve been getting from friends and colleagues this year have been in response to the latest wave of trade tariffs or most recent Brexit development, and they always end the same way - what now? As investors, if we find ourselves wondering how to set our portfolios up well when something has just taken place, we’re far too late to the party.

Diversifying across assets and geographies right from the outset is the most important way to begin tackling all sorts of unpredictable market occurrences, as well as the opportunities we see along the way. If 2019 is the year you adequately diversify your portfolio then I’d say it’s a year well-spent. Happy new year.

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.