Your Noise Is My Noise

I’ve been advising and managing the equity portfolios for individuals for 20 years. My business is to analyse investment opportunities and the various probabilities of certain things occurring in the future so to position my clients and their money can benefit from my views.

Those views are formulated by me, the investment advisor, using a host of information and sources so it can be dispensed specifically to fit an investors situation.

One problem that I face and I’m sure for many investment professionals who deal directly with their clients do, is to continually diffuse and deflect the opinions and influence that media commentators and “experts” create.

There is often little merit or evidence to their claims that they predicted an event or “saw it coming”. It is equally concerning when the “noise” created about a recent occurrence is structured to suggest that the recent past or the present is now destined to look like the future.

Which brings me to the current flux of the Crude Oil price.

I find it difficult to believe that so many people have suddenly predicted the 50% fall in the oil price. I don’t recall reading or hearing such predictions, yet now these media prophets are receiving adequate air-time for their supposed foresight.

What happens next is that private client investors takes this information as gospel and call their financial professional panting about the analytical revelation they have just heard or read.

Four messages to financial media personalities:

1) Your statements do not help anybody, other than trick people into thinking you are an authority on a subject.

2) Telling me what has happened is useless. It has already happened.

3) The markets have already reacted to the facts.

4)Prices have discounted this news.

My advice to investors is to dismiss this stuff because often the “expert” isn’t a financial professional, nor are they an investor or a participant in the market, let alone licensed or regulated to provide such advice. I’d be interested to ask anyone of them if they have ever put any of their own money at risk behind any of their comments.

It is important to analyse what has occurred in order to educate yourself so to understand history and circumstances which led to an event, but from there on, especially when investing, ice hockey legend, Wayne Gretsky’s quote seems quite relevant, “I skate to where the puck is going to be, not where it has been”.

 

If you choose to listen or absorb the news and comments about the capital markets, be discerning about who the person is, what their background is, what are their motivations are and whether they have any “skin in the game”.

I think that there is too much energy spent talking about historical facts and masking them as if the preacher had predicted it. Just observe the recent events involving earthquakes, rising property prices, shark attacks, plane crashes and terrorist rampages. Everybody is an expert after the fact and they love telling me how they “told me so”.

The next time that you choose to act on an investment idea or comment that you’ve heard on TV, then I suggest that you periodically and continually call that journalist or “guest expert” and continue to ask them for advice about how the investment is working out and have them explain why its not looking so wonderful at any point in time.

Don’t let other people’s “noise” become part of your investing process.

Not paying for advice will cost you more

An article that appeared in The Australian newspaper, dated June 8-9, 2013, mentioned the findings of a survey conducted by research group, CoreData which illustrates their respondents investment position.

Their survey found the group of “mass-affluent” participants are holding almost twice the amount of cash than those catergorised as high net worth.

Commonly, “mass affluent” investors are considered to have a minimum of $50,000 to invest, up to $500,000, while a net worth investor is one who has more than $500,000 of investible assets.

The reasons for the “mass affluents” higher cash allocation were cited that they “don’t like volatility, they’e not sure what to do and” and generally, they are self-directed investors.

The article and survey surmised that these investors have remained paralysed in cash whilst asset prices have risen over the past 3 years.

In other words, they don’t seek or haven’t sought professional investment advice.

Has the advent of the “do-it-yourself” online investor been positive?

Why do so many unsophisticated and often financially illiterate investors choose to not pay for advice when they try to manage and investing their money?

I’m not sure if they’re saving money by not paying for advice?

Perhaps their reluctance to engage professional help is that have are being sold products (see “solutions”) rather than receiving advice.

Inversely, corporations, governments and experienced, wealthy investors often seek and pay for advice from various professionals (be it structural, strategic, financial or legal) prior to making investing decisions?

This group wouldn’t accept the notion of being “sold to”.

It’s time for smaller investors to demand that they receive advice for their money and not “solutions” and “products”.

 

 

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