Best Investment Strategy: Control what you can

One of the biggest peeves in investing is dealing with unforeseeable circumstances. Even if you work with the best investment manager in the world, there will always be risk that no one saw coming.

For instance, no one expected that the COVID-19 virus would become a global pandemic, grounding places, halting businesses and exposing many working-class individuals to financial risk. No one saw the Ukraine and Russia war coming or rising inflation in 2022. The fact is uncertainty and change is inevitable and cannot be controlled.

One of the biggest problems investors face, as we recently posted is the illusion of control. We think we can predict or in some way influence situations that are completely out of our hands. Why do we do it? Because that’s the way our brains are wired. We crave certainty. We want to be authors of our own destiny. And we shrink from the notion that, to a large extent, our lives are governed by luck — both good and bad — and simple random chance. So the key to solid investing is to control what you can and ignore the uncontrollable.

Financial crises are not a permanent condition

As the world continues to experience turbulent times, the markets are fluid. With the current geo-political and economic circumstances, it is of no surprise that many investors in Hong Kong are feeling anxious about their investments. Many are investing and wondering if they are making the right move. And with inflation and adverse reports, it can be easy to lose hope. The media is currently filled with news of staff layoffs and poor earnings. However, while investors only read the adverse reports and give in despair, the seasoned investor reconsiders one key fact: Financial crises are not permanent.

Financial crises are often a litmus test of your financial knowledge and the strength of your investment advice. It is often the time that many unguided investors lose their fortunes. On the other hand, it is an opportunity for those with the proper financial guidance to learn to stay calm and focus on their long-term plans.

Staying focused on the long-term

If you are concerned about your investments, remind yourself that world events and the impact they have on stock prices are completely out of your control.

More importantly, don’t try to exert control now, by changing your portfolio. Any “losses” you may have incurred in recent days and weeks are only losses on paper; by selling out of equities you’re simply turning them into actual losses. And certainly ignore the those who try to capitalise on fear at times like these to sell you expensive, actively managed investments which almost certainly won’t protect you from any further downturn.

Focus instead on things you can control. You can’t control the markets; but you can control how you respond to them. You can’t prevent the Russians invading Ukraine, but you you can stop them from affecting your long-term financial plans. So stop watching the news and the latest market data. Switch off all that breathless commentary in the media. Distract yourself. Read a book. Get some fresh air.

Design an investment plan that requires you to do nothing

Contrary to popular opinion, the best approach in most financial crises or times of volatility is to do nothing. Of course, some situations require immediate drastic action. However, those times are rare and far between. We have had bad times turn for good on a second’s notice and vice versa.

A solid investment plan will help you ride through the hard times and help you make a profit during the good times. Of course, for this plan to work effectively, it has to be tailored exclusively to your investment needs, performance and lifestyle.

Remember, you cannot control everything. But you can control how you set up your investment plan to get the most out of any season the market enters.

Contact us today to discuss your investment plans, needs, and goals.