<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
SIMON BROWN: I\u2019m chatting now with Mark MacSymon, a wealth manager at Private Client Holdings. Mark, appreciate the early morning time. Market volatility \u2013 \u00a0in a recent piece you put out you talk around the sort of prices of admission to the investment system. In essence, volatility is a feature, it\u2019s not a bug. Notwithstanding, as investors we seriously dislike it and we struggle with that volatility.<\/p>\n
MARK MACSYMON: Yes, good morning Simon and good morning to your listeners. I think investors have had to deal with a fair amount over the last five or six years. The Covid pandemic seems like it was just yesterday. Then we had the polycrisis in 2022, Trump\u2019s Liberation Day last year, and this year we have had to deal with the US-Iran war.<\/p>\n
These market events have been characterised by fairly steep drawdowns and, I guess, fairly swift recoveries.<\/p>\n
But we\u2019re exposed to market movements constantly now. Twenty years ago clients saw a quarterly statement, and today they can check their portfolios every hour on their phone.<\/p>\n
And in Gloria Mark\u2019s \u2018attention span\u2019 she highlights that adult attention spans have declined by roughly two-thirds. That matters, because investing requires patience. Yet the world increasingly rewards immediacy. The average holding period of equities has fallen dramatically over the decades.<\/p>\n
Read\/Watch:
Managing market volatility with both fundamentals and technology
For long-term investors, thinking differently usually doesn\u2019t pay
Trying to drown out the noise \u2026<\/p>\n
SIMON BROWN: Two points around that \u2013 sorry to jump in. It\u2019s really a great point. I hadn\u2019t thought about it. Back in the day I used to check the market performance with the morning newspaper. Literally, that was it. I\u2019m thinking the crash of \u201987 maybe made the lunchtime news, but it was a once-a-day process. And for many people it was not even once a day. It was less frequent. Now it is on my phone 24\/7. That\u2019s stressing me.<\/p>\n
MARK MACSYMON: Yes, absolutely. Investors have all of this data, all of this information at their fingertips. We see it with clients. There are certain clients that will check information very regularly if not, as I said, multiple times on a daily basis.<\/p>\n
When you think about it, over the years the average holding period of equities has fallen dramatically, as I mentioned earlier. Investing is a patience game.<\/p>\n
The reality is that there are market movements out there, while high-frequency machine trading, algorithmic trading and systematic trading almost amplify the short-term noise.<\/p>\n
And then there is some really fascinating behavioural research at the moment which shows that the more often people observe their investments, the more volatility they perceive and the more emotionally uncomfortable it becomes \u2013 which ultimately leads to poor long-term decision making.<\/p>\n
Behavioural scientists effectively call this \u2018thin slicing\u2019. But then when we add social media, 24-hour financial news, instant commentary, it all creates a sense of urgency. But at the end of the day not every market move deserves action.<\/p>\n
Read: Financial behaviour \u2013 Part 11: Framing bias \u2013 How information is presented can mislead you<\/p>\n
SIMON BROWN: I agree. \u00a0I would wager that most market moves don\u2019t deserve action and that for the average investor we are better served looking at the market less. We think it\u2019s giving us an edge.<\/p>\n
We\u2019re actually better putting the phone down, turning it off and going back to that quarterly statement, or annual statement.<\/p>\n
MARK MACSYMON: Yes, 100%. At the end of the day we\u2019re all human and we\u2019re all exposed to, I guess, a degree of discomfort, especially when it comes to money. Money is an emotional aspect for most people.<\/p>\n
And there\u2019s this behavioural bias and it\u2019s a horrible one because it\u2019s asymmetric. It\u2019s not a perfect trade-off. It\u2019s an asymmetric trade-off. It\u2019s called \u2018loss aversion\u2019.<\/p>\n
What it means is that for many people losing R100\u00a0000 hurts emotionally far more than gaining R100 000 feels good.<\/p>\n
So when markets fall sharply, selling feels like taking control. But emotionally comforting decisions are often financially damaging. So many people have this inclination and sell off the declines and reinvest after recoveries. In effect what they\u2019re doing is buying high and selling low.<\/p>\n
Read: Fear of losses vs ecstasy of gains: How this affects your investment decisions<\/p>\n
SIMON BROWN: Yes. This is a point I\u2019ve made before on this show \u2013 that for the advisor the biggest point of value from a wealth manager is that kind of keeping me on the straight and narrow. It is stopping me doing things, perhaps more than anything.<\/p>\n
MARK MACSYMON: And I think that changes over time. So it\u2019s not always the case. During calm periods structuring asset allocation, investment selection matters.<\/p>\n
But during volatile periods \u2013 those events which I mentioned earlier \u2013 we focus on helping clients stay disciplined; and that often matters more. So in difficult markets we become part strategist, part behavioural coach, part emotional sounding board.<\/p>\n
I guess I\u2019m less interested in predicting the next correction, because I can\u2019t, than helping clients prepare for one when it arrives.<\/p>\n
Read: In times of uncertainty, advice is the system that holds<\/p>\n
There\u2019s a lot of good communication that takes place during those, let\u2019s say, more volatile periods. And the communication with clients is not about when there will be a recession or when there will be a downturn. It\u2019s how do we respond? How do we react? How do we behave when it does happen?<\/p>\n
And then, it\u2019s crucially important to set expectations around volatility. Most portfolios are \u2013 let\u2019s take a multi-managed sort of high-equity fund, for example. Four or five \u00a0months during the year that fund is going to be down. The other six or seven times it\u2019s going to be up. But just giving an idea of that risk\/return signature is incredibly important.<\/p>\n
SIMON BROWN: Absolutely. And it\u2019s hard to respond. We know it will happen. We don\u2019t know when it will happen, but we can learn how to respond as markets fall, because they do. They spend more time going up than down, but they spend a lot of time going down as well.<\/p>\n
We\u2019ll leave it there. Mark MacSymon, wealth manager at Private Client Holdings, appreciate the early morning time.<\/p>\n
#wealth #managers #investors #avoid #costly #mistakes<\/p>\n","protected":false},"excerpt":{"rendered":"
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