Don't Worry, Be Happy

There is a lot to worry about for investors at the moment – mining taxes, Euro zone debt fears, Middle East tension. What is an investor to do?
I have been in the Financial Planning Industry for over ten years now and I must say, it doesn’t get much better than this (although memory dulls the pain).
Let’s start by casting our minds back to the Asian Financial Crisis in 1997. This was followed by the Russian debt crisis in 1998 and the collapse of the ironically named hedge fund – Long -Term Capital Management.
In 1999 all we had to contend with was the Y2K bug. Remember that? Planes were going to fall out of the sky! With that safely behind us, the internet bubble burst in the year 2000 wreaking havoc to speculative investors around the world. In 2001 we had the terrorist attacks in the United States on September 11.
In 2002 the United States had another Terrorist attack which was home grown. It came in the form of “the smartest guys in the room” at energy company Enron Ltd. They caused a market meltdown as investors questioned the honesty of corporate America.
And in 2003 we had the war on Iraq......are you starting to get the picture?
This perception of fear has been heightened in the past decade or so with the emergence of a Media focused on the 24 hour news cycle. We have more information at our finger tips (the internet) and a quick glance at Pay TV shows even locally we have access to three 24 hour Business News channels. This is a lot of content that needs to be filled each day!
For investors there will always be something to worry about. However, what we can learn from history is that maximum financial opportunity occurs when investors are most fearful, or put another way, future expected returns are at their highest when prices are at their lowest.
The future is a series of unpredictable events so if an investor would like to achieve a return greater than the risk free rate, they had better get used to some bad news.

Julian McLaren is a Representative of the Shadforth Financial Group (AFS Licence No. 318613) Julian may be contacted on 69317488. This is general advice and readers should seek their own professional advice in regards to their individual circumstances.