Friday's 5 Minute Note
"Be fearful when others are greedy, and greedy when others are fearful" - doing your own due diligence.
Financial Advice - "Price is what you pay, Value is what you get".
Posthumous Award - Dickin Medal for Bravery.
It's been another bumpy week in international markets. When this happens, people's flight or fight responses kick in, which is a natural emotional reaction and a key component on the psychology of investing. And as always happens when markets turn, I get phone calls about investing in physical commodities (gold, silver, nickel) or any other physical asset (such as property); anything as an alternative to remaining invested in the markets.
Warren Buffet is attributed with saying "Be fearful when others are greedy, and greedy when others are fearful". From a contrarian point of view, I think this leads to another sage peace of advice, and that is to do your own research and don't follow the herd. With the continuing development of technology and ease of access to information on the web, doing one's own due diligence simply comes down to the expenditure of personal time and effort.
In terms of how technology changes our interface with markets, check out the following interactive map available for free at Seeking Alpha, which at a summary glance provides a visual snapshot of all global markets performance. Far better than poring over returns tables in print media.
Seeking Alpha is a great resource for doing your own due diligence and gaining an array of views from a diverse range of contributors. I first started reading the site on my second deployment to Afghanistan, at a time when the site had only 300,000 members, and has since grown to 7.1M members. I have been both a long time reader and contributor for years (less so on the latter due to my own professional time constraints), but I highly recommend it as a starting point for people looking for a contrarian point of view, or a place to test an investment thesis.
Five Minute Focus - Price is what you pay, Value is what you get
In my role as a Financial Adviser CFP® Professional, I get to deal with a diverse rage of clients who have differing reasons for seeking out financial advice, and it is satisfying to work with them over a number of years to make significant changes to their lives in order to achieve financial peace of mind.
Like the vast majority of businesses, not everyone who comes through the door will end up being a long term client, and finding the right team of professionals is as important to them as clients, as it is to us in being able to work with our ideal clients. In our business we don't profess to be everything to everyone, and are happy to work with clients that we enjoy working with, and they value what we do.
In strategy and investment circles there is a saying that "Price is what you pay, Value is what you get". For instance, if you pay $1M for an investment property in an inflated market (think when others have fear of missing out), but the real value is $750K (which is validated by a market correction months or years later), then what you are stuck with is an asset you paid too much for in the first place - because the true underlying value was $750K. I would argue that every single successful investor has made this mistake at least once, and the hard lessons are the ones we pay the most attention to.
The same can be said for paying for initial and ongoing financial advice. The cost of strategy development work can range from several thousand to tens of thousands of dollars, and the same applies for ongoing advice. Why such disparity - because not all clients are the same - and there are no such things as standard template solutions. You can also underpay for advice as well as overpay, so it is important that you do your own due diligence and enage a Financial Adviser that resonates with you, and who can demonstrate to you the value you receive for the price that you pay.
What we do know and which has been validated by research company Core Data, is that those who receive financial advice are more likely to be confident, be wealthier, have better risk cover, and be less vulnerable (physically and emotionally) to economic shocks. As someone who has sat on both sides of the Client / Adviser relationship, I couldn't agree more.
Sometimes there are new clients who don't engage because they focus on the cost of advice, but that can be because they don't understand the value of what they are getting, or they fall into a trap of thinking I can get it better elsewhere cheaper. I've never gotten my head around the fact that there are people who won't spend several thousand dollars for a considered personal plan around wealth creation and preservation, but who happily go out shopping on a whim on the weekends and drop several thousand dollars on wide screen TVs and household consumables.
Which one is more worthy of a discretionary spend - a strategy for accumulating wealth for your retirement and family's financial security over several decades, or the latest TV with a shelf life of five years...
Something Personal - Posthumous Award Dickin Medal for Bravery
Special Operations Military Working Dog 'Kuga' was posthumously awarded the Dickin Medal for Bravery (essentially the Victoria Cross for animals), for actions in saving lives in a Talban ambush in Afghanistan in 2011, during which he was shot five times.
Victoria Cross recipient and former military dog handler Mark Donaldson, VC accepted the medal with service dog Odin on Kuga's behalf, and an overview of the article can be found on the ABC's news website.
That's it for this weeks Friday's 5 Minute Note. If you are a new reader and would like to be on the mailing list, feel free to subscribe ...