Marilize Lansdell, CEO, PSG Wealth
With volatility a more or less permanent feature of the investment environment, investors need to become more robust in how they approach creating wealth.
A robust investor is someone who is not thrown off guard in the investment world by macro and market events. These investors manage to stay true to their intended course and calmly navigate their way across the investment seas, regardless of how choppy the investment waters become. Ultimately, these are the investors who achieve their goals and build portfolios the rest of us can only aspire to. But how do they get there?
There are four distinct characteristics that come to mind when I think about what makes for robust investors.
They collaborate with trusted partners
No one can successfully go it alone, least of all in a complex environment like investing. You want to know that those you entrust your money to will exercise the highest level of care in looking after it. Trusted partners have long-term track records of offering clients value for money and delivering on promises that set them apart from the rest.
They make sound investment choices
It is impossible to have a robust investment portfolio without having a sound investment strategy in place. You cannot navigate an ocean in a vessel that is not seaworthy, and your underlying investment choices must equip you to reach your investment goals. You would not use an ocean liner to navigate a dam and you would not choose a rowboat to take on the open sea. Yet many investors with long-term goals end up in short-term money market investments that are ill-equipped to deliver inflation-beating growth. Make sure your choice of investment vessel can help you go the distance.
Diversification remains the simplest and most effective tool for securing higher returns at lower overall risk. Sound investment portfolios are well diversified across managers, regions and asset classes. Seasoned investment professionals are best positioned to help you navigate the hidden concentration risks that often catch novices unawares.
They have a professional mindset
While novice investors are reactive in response to market uncertainty, professional investors are prepared and use market weakness as an opportunity to buy, confident that their strategies will pay off in the long run. Professionals base their decisions on research and have a disciplined approach to making decisions.
Behavioural biases remain the biggest destroyer of value and individual investors’ biggest downfall. Partnering with a qualified financial adviser to provide a fresh perspective and test your thinking remains one of the best ways to overcome our built-in biases and to make better, less emotional decisions. An outside perspective can nudge you to keep your eyes on the horizon, rather than focusing on choppy waters at your feet.
They are smart and secure
What would the point be of growing your wealth, if you don’t take the time to secure it and use it smartly? The best-laid investment plans end up in deep waters if a household suddenly loses its main breadwinner. Make sure you have a valid will and estate plan in place. Consider your income replacement needs in case you become disabled or critically ill. Use tax-efficient products to ensure your investments have the best chance to grow, and consider tax-smart products if you pay high marginal tax. There are many different aspects to consider when it comes to addressing your long-term financial well-being. Your financial adviser is best positioned to provide you with the holistic perspective you need to truly become a robust investor.
Robust investors are bigger picture thinkers
Becoming a robust investor is not a one-dimensional undertaking and a simple tick list or go-it-alone attitude will not get you there. Start by ensuring you side with a trusted partner who can help you see the bigger picture.