Episode 12

Repress, suppress, invest! Check your emotions at the door

Welcome – Today we’re talking about controlling your behaviours and emotions…when it comes to investing

  1. Investing is an action, controlled by behaviours – emotions change your behaviours.
  2. Getting a good investment midframe allows you to invest well for the long term.

How to start investing and not muck up – This means controlling your fear more than trying to control investments – Can’t control what investments do short term

  1. Fear is an emotion – Which stops you from investing
  2. Starting is the hardest part – Getting the right fame of mind and overcoming fear
  3. But staying motivated and on track is just as hard
    • Life gets in the way – and new things happen in your personal life as well as market ups and downs

How to start? “Needs-based” plans – ignoring your emotions

  1. Hard to know – “you don’t know what you don’t know”
    1. What are you trying to achieve? – If you don’t know your reasons to invest, you can’t answer this
      • Long term growth?
      • Passive income?
    2. How will you achieve this? Strategies and investment options
      • Save a deposit – Buying a property
      • Monthly investing into Managed funds, LICs, rather than savings
  1. The most important thing is to just start – otherwise fear will take over and then so will indecision
    1. Information overload will be hard to overcome
      • Diversified products help to remove this – ETFs = let someone else make the investment decisions for you
    2. Taking the plunge – Start small if you are uncomfortable
      • You don’t need to put everything in, but a small amount
      • Example: Some people like to jump into a cold pool, others start with feet and slowly move in to acclimatise. Like a pool of investments, some people do dive heard first into pools, but what happens when they can’t see the bottom, or can’t swim?
        • If they break their neck or drown, would people say that pools are dangerous, or the behaviours were dangerous?
        • Say it is your pool, or a pool you go in every day? You know what you are in for – So you know if you should dive, or slowly get in.
      • Prior experiences do affect your future behaviours
        • Buy a property that goes down – Will you be more or less likely to buy another?
        • Buy shares right before a crash – will you be more or less likely to think share are too risky?
        • LESS likely in most cases – But these are some of the best long-term investments thanks to GROWTH
      • Don’t let one bad experience stop you
        • Or something you hear about – fear will come in from hearing about other people losing money

Failing at investments

  1. FEAR = failure
  2. Rational fears vs Irrational Fears – Some fear is good, but only of very risky investments, or of diving in head first!
  3. Stops people from starting to invest – Fear of the unknown – Shares are ownership
  4. Investments will fall apart if you respond by fear!
    • Doing the wrong thing – “fear selling”
  5. FEAR leads to following others instead of doing what is right for you.
    • Do they know something you don’t? SO, you follow them just in case, even if it’s irrational!
    • Buying – Leads to buying at peaks of bubbles
      • All because people buy property doesn’t mean you should.
      • All because people buy shares, doesn’t mean you should.
    • Selling – Leads to selling in the crashes
  6. How do you avoid this?

10 Do’s and 500 Don’ts of knife safety – Don’t do what Donny Don’t does!

  1. Investments can be pointy and have sharp declines – Killing your investment future
  2. I have some rules when I invest: There aren’t 10 – there are 5

Rule 1) Invest for the long term with a purpose!

  • This means holding through the cycles
  • Also investing in a diversified portfolio to survive – long term!
  • Not putting more into one investment than I can afford to lose

Rule 2) Don’t invest out of hope, or more than you can afford to lose – That is gambling

  • Invest with a greater certainty
  • Avoids you chasing the risky (and unlikely gains)
  • EXAMPLE – the only losses I have in shares is from hoping they will be big returns in the short term… they weren’t

Rule 3) Don’t do what the crowd is doing, just because they are doing it,

  • That is called “Contrarian investing”.
  • Buy when others are selling
    • Personally, I love doing this. Like the “divorce yard-sale” of investments
  • Sell when others are buying
    • Personally, I don’t do this, as what would I buy if I sold? I just wait for the crash and get things on discount.
    • I just don’t buy at these points, but I don’t sell.
  • You can’t time the market, but you can know when things are cheap or expensive.
    • Buy when it is cheap, and don’t buy when it is expensive

Rule 4) Don’t listen to the media – Their job is to sell fear and there is always a new crash coming

  • Try to sell when to buy: Look at the fads of investments – short term holds – but longer term someone is left holding the bag.
  • You don’t want to have to change your investment wardrobe every 6 months.
    • What do you replace it with? When you sell an investment, it goes to cash
    • Then what do you buy?
      • You are back at square one – Figuring out what to invest in now!

Rule 5) – If in doubt, remember rules 1 to 4!

 

In summary

  • Just start, but don’t dive in head first unless you know how deep the pool is.
  • Come up with your own rules over time as well. And avoid the fear!
  • Getting started in investments and keeping going is all about your behaviours.

What happens when a family trust comes to the end of its life? What happens with the assets and are there CGT or stamp duty liabilities?

Welcome to Finance and Fury, The Say What Wednesday edition.  Today's question comes from Gab. Hi Louis, thank you (as always) for the great content. I've got another question that I've struggled with recently, and I'm hoping you can shed some light on the topic. I've...

Financial crash proof your share investments

Episode 11 Financial crash proof your share investments Welcome to Finance and Fury! Financial Crash proof your Share investments There is no way to control the rise and fall of investments but focusing on what you can control makes all the difference! Behaviours lead...

Say What Wednesday: What is the real danger behind Climate Change?

Welcome to Finance and Fury, the Say What Wednesday edition. Today we are going to cover off on Climate Change. This may be a bit weird. But, the majority of proposed solutions are political/economic. Firstly, the taxation on CO2 emissions. What is this going to do to...

Is Disability Insurance redundant now with the introduction of the NDIS?

Welcome to Finance and Fury, the Say What Wednesday Edition This week’s question comes from John. Hey Louis, Really enjoying your latest episodes, thanks again for the great content. I saw recently there was a question raised around superannuation reform that TPD...

How to analyse share markets by treating them as a complex system

Welcome to Finance and Fury Series on Share markets as complex systems – a different way of thinking about them – This episode, discuss some basics of shares and introduce complexity theory – Nonlinear, Emergence, Spontaneous order, Adaption, Feedback loops Shares -...

What not to invest in!

Hi everyone and welcome to Finance and Fury. If you missed last Monday’s episode on bank bail in laws, you might want to go back and catch up as this week’s episode follows on from that one. Today we’ll look at what to avoid holding as investment in the future, based...

Are tech shares like Afterpay and Facebook are a good long-term investment option?

Welcome to Finance and Fury, the Say What Wednesday edition.  Today's question comes from Mike - "Hey Louis, Wondering if you think buying Tech shares are worthwhile"  We have the FANG and the WAAAX – US – FANG - Facebook, Amazon, Netflix and Google Aus – WAAAX -...

Say What Wednesdays: What advice would you give your 21-year-old self?

Say What Wednesdays What advice would you give your 21-year-old self? Today’s question is from Declan, “What advice would you give your 21-year-old self?” To my 21-year-old self I would have the following advice: Life is a series of challenges, the more you solve the...

Furious Fridays: Dissecting Labor’s plans for housing affordability

Furious Fridays Dissecting Labor’s plans for housing affordability Welcome Finance and Fury’s Furious Friday episode. Today we’re answering the question we asked on Wednesday about Labor’s polices and their promises to lower housing prices/increase affordability. If...

Say ‘What’ Wednesdays: Is it time to jump ship? Should you sell your bank shares?

Say 'What' Wednesday Is it time to jump ship? Should you sell your bank shares? Today’s question comes from Jake. He asks “should I sell my bank shares, given the recent fall out from the royal banking commission?” IMPORTANT: This episode comes with a general advice...

Pin It on Pinterest

Share This