Law & Finance
YOUR PERSONAL INVESTMENT COACH: MIKE LEGASSICK It’s that time of the year when we make resolutions to improve our lives in the new year. Health and finances always seem to be among the top areas we wish to improve. In this piece I have decided to write about the 3 most important things that all investors need to be aware of.
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ne of the most common questions I get asked is “what’s working now Mike or where is the best place to invest now Mike?” My answer is always the same. I have only ever invested my clients’ money in what has always worked and that is a huge collection of the greatest companies on the planet. I have never invested my clients’ money in whatever the current fad happens to be. Examples of what people think are hot right now are Cryptocurrency, Brazilian Teak Farms, and Car Parks to name a few. If a client wants to invest in just one or two highly volatile, high risk asset classes that’s up to them, but I will have no part of it. If it is money they can afford to lose completely and it won’t impact their financial and retirement plans then they can go and knock themselves out. After all, it is their money. What’s Working Now? - The Turkey’s Story To bring the permanent loss of capital or the ‘what’s working now’ dangers to life, try to think of them in terms of being a turkey on a farm. I know this sounds a little crazy, but please bear with me. You’re a turkey in a little coop and every day that
goes by you become more confident and comfortable with the farmer and your environment. Why wouldn’t you? Every day he puts grain in one trough and water into another for you. This farmer clearly has your best interests at heart. You have a nice warm place to live, and you are protected from natural predators. You really like and trust this farmer. You’re permanently hanging out with your family and friends, and you don’t have a care in the world. Life is good. You’re getting really well fed and every day you are getting bigger, bigger, and bigger. So as time passes you grow more comfortable and settled in your rosy idyllic surroundings – that is, until a few days before Christmas when things take an unexpected turn for the worse. You get an unsettled feeling that something is not right. The farmer has not come in as usual, he’s late, and then suddenly the shed door is flung wide open and there’s a big truck outside and all your friends and family are getting loaded into the truck. Christmas is just a few days away. You’re thinking to yourself “what’s going on here?” You don’t know it yet, but you are soon going to be someone’s Christmas lunch.
Meet Mike LeGassick And it was all going so well until that day. This is what the permanent, irretrievable, loss of capital feels like. Similarly investing your life savings in something that just happens to be working right now, the latest fad, most often produces the same outcome. Just when you thought that things could not get any better, reality bites and BANG! GAME OVER. Do your investments have the characteristics of the turkey, that misplaced trust, the false sense of security? If so, ask yourself whether you could be the turkey here?
The Rollercoaster In over 30 years as an investment adviser, the single biggest and most dangerous mistake I have seen people make is confusing volatility with the permanent loss of capital. Be very aware that these are 2 very different things. You should think about volatility as being on a rollercoaster. If you have ever been on a rollercoaster, you probably experienced mixed emotions as you were about to get into your seat. Most people feel excited and fearful. You know that this is going to be both scary and exhilarating. You sit down, you lock the safety bar into place across your chest thinking that this is a bit tight, and you start your steep, high climb up the rollercoaster track. Up you go higher and higher to the apex and then as you drop down the other side at high speed you are screaming thinking you’re about to die. You go through the first loop the loop and then
34 January 2022
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