Concerns about the market... Or here we go again.

Should you be concerned about what's going on in the share market/s lately?

The short answer is no. The longer answer would be:

In times of market volatility (nervousness and high emotion) it’s often good to reflect and put things in context. In Nov 2007, the Australian share market was at its all-time high. In 2009 it fell 54%. Since then, the ASX200 returned to almost 6000, recouping almost 80% of the lost ground. Today the Australian share market currently sits around the 5000 mark. 

Ok, so what does it all mean and what do I have to do?

The answer is not much, except remembering the conversations about investing with your financial planner.

These ups and downs (or the volatility as the experts call it) are absolutely normal. They’re organic and we want them to happen. If we didn’t want this volatility in the first place, we’d simply always keep your money in cash. But that wouldn’t be that great either as after inflation there would be nothing left. Therefore, the volatility is good!  It's there for the same reason as the premium returns we get from investing in great businesses in Australia and overseas (also called shares). We have to accept it and appreciate it.

For those people in accumulation phase, still working and contributing into super/investments (let’s call this group – the buyers) this presents a great value opportunity to accumulate more at attractive prices. Just picture going to a fruit market, having same amount of money in your pocket as yesterday and seeing lower prices. As  a buyer, you're getting more value for your money. Happy days.

For those people who finished investing new money - in retirement phase (let’s call this group – the receivers ) - we need to remember that the income they receive from their portfolio is not paid based on its value (or what the portfolio is worth) but the number of units they hold. And although the volatility impacts on the first, it doesn't have any impact on the latter. 

It also highlights the importance of maintaining cash (one or two years’ worth) in your retirement income portfolios to help weather the volatility and not forcing you to sell.

Finally, the share market, just like us, is emotional. There are no good or bad markets. There’s just the market. And Mr Market has a bad temper sometimes. The best we can do is to leave him alone and not try to control it. Or as your financial coach will always tell you, let’s take a step back and think about why we're investing in the first place. This is the main reason you hired them - to put things in perspective and to stop you from making bad decisions with your money.

Hope this puts things in context for you. Please let me know if you have any questions.

Story about a coat ... And perhaps something else too.

I don't know about where you are, but it's freezing cold here in Sydney right now. My wife is excited because she can take out all her winter fashion  and as every winter, she tries her tricks to influence me to wear my winter coats too. 

I categorically refuse. Not because I hate fashion, but because I'm originally from Europe. I moved to Australia with a view of enjoying mild and warm weather all year round. At least that was the story I kept telling myself. My silly coat story...

So, everytime the winter comes along, I get my annual talk about wearing warm coats. And every year I've managed to brush it off. 

Until today. 

It was a particulary cold morning and I've decided that I give it a go. I listened to my wife. I put my winter coat on and I walked out of the house. Seconds after I've realised something strange. There was no usual cold wind getting under my suit jacket, there was no shaking, no whinging. I was warm. I was comfortable. And I was loving it! 

Then I thought of my wife. Why haven't I listened to her before..!? Was it my stubborness, was it my pride? Whatever it was, it stopped from having what I ultimately wanted, which was feeling warm and happy.

Funny the human behaviour. It plays tricks on us and it clouds our vision sometimes. 

It's only after we manage to get through it, we look back and think ,wow, why didn't I do it earlier.?! It reminds me what people say in my office all the time. Why didn't we come in earlier? Or I wish I came here earlier...

I know everyone goes through these moments. I hope this example sparks something in one of you... I hope it inspires you to stop delaying what deep inside you may know is right but you've been trying to ignore it for ages.

Please use the comments below to share your own coat story. I can't wait to read about it!

@MichalBodi

mbodi@sydneyfinancialplanning.com.au

image courtesy of freedigitalphotos.net and stuart miles.

Spoilt for choice, or choices spoilt?

I was buying an audio book the other day.  

And I was in the mood for a good book – there wasn't something in particular I was looking for.  I just wanted something on leadership.  

After 40 minutes (!!!), I ended up with five books in the shopping trolley and no idea what to do next.  I was completely stuck – it was like my mind was paralysed by the options I had available to me.

There was a book written by an author I've read (and enjoyed) before.

Two books had names that I found really intriguing.

Then there was a book recommended to me by a friend.

And with the last one, it was the summary blurb I what I found interesting and it made me press the ‘buy now’ button.

They were all fascinating in their own right and they all were what I was looking for.  

But there I was, sitting at my desk, completely frozen with no idea which one to choose.  

It was all going so well – I narrowed down the 25 search results to a shortlist of five, but I couldn’t get any further.

Did the muse leave me there at the crucial moment?

I wanted to pick the best one – the best of the best!!!  With work and kids, I don’t get a lot of time to relax and enjoy a really good, stimulating book, and so that time one-on-one with a good book is too precious for me to waste on the wrong book.

Unable to move any further, I ended up getting distracted by my kids, I turned off the laptop and didn't make a purchase...

It took me a good few weeks before I was able to go back and buy something. 

And guess what, I ended up buying one of the ones looked at previously.  I didn't bother with shortlists this time around – I just went in and bought the one that was recommended by someone I trust.

Because of that, I've got a good read waiting for me at the end of the day.  I’m really enjoying the book, and I'm so glad I went back and bought it.

It seems like everywhere you look these days, there’s yet another choice that has to be made.  Big choices, small choices, important choices, insignificant choices - they all seem to weigh us down and put pressure on us to get it right - to make the best choice.

The concept of the best is clouding our vision. 

It doesn't have to be that way. Once we allow ourselves to have the freedom to trust and be guided by an objective point of view, the weight is lifted. 

A choice made will always be better than the one you plan to make (one day).

by Michal Bodi

Have you had a similar experience? I'd love you to share with me.

You don't pay me for my time...

I recently had to go to an eye specialist. 

The guy I went to was recommended to me as the best in his field.

I showed up at the clinic on time, feeling a little nervous and unsure of what was happening next.  

One of his assistants explained the process to me step by step.  I was really grateful for that – I was getting a little freaked out, thinking about someone sticking sharp tools into my eye while I was watching!

I had to wait a little longer and then I was taken through to the surgery. The doctor’s assistants and a nurse started preparing my eye – cleaning the skin around it, putting on the protective material, adjusting the lights and laying out all the tools.  

I was laying there for about 20 minutes before the actual specialist came in.  He sat down next to me, looked into my eye and did a few tiny but precise moves with his tools.  Within a minute he was done and said, ‘There you go, all fixed.’  I thought, ‘wow, that was quick!’

As I was waiting to pay, l there was a guy in front of me who’d had the same procedure.  ‘That’s $745, sir,’ said the secretary.

He shook his head and said, ‘Wow, that a hell of an hourly rate!’  

The specialist overheard him.  He came out of his office and walked over to the guy.  He smiled and calmly said, ‘You don’t pay me for my time.’  Then he turned around and went back to his office.  He didn't need to say anything else.

I was gobsmacked!  This guy was spot on!  I immediately thought of the work I do with my clients.

Even though it takes me a little more than a few minutes to do my job, it’s not about billable hours, or the amount of time I spend in front of my client.  The value is somewhere else - It’s about the outcomes we can achieve together. The outcomes they care about.

I help them build the fundamentals which lead to the life my clients want to live.  

The value of that can rarely be expressed in numbers. 

by Michal Bodi

I thrive on a feedback, please let me know what you think, drop me a line to mbodi@sydneyfinancialplanning.com.au or simply comment on this article. I'd really love to hear from you.