Let’s make it a real resolution in 2022 to focus together on the big picture when it comes to your finances. All too often, it can be very easy to be dragged down into weeds – in our world that’s the (very important too) world of products, funds and fund managers. Don’t get us wrong, these really matter and need to be discussed, but never at the expense of discussing the bigger picture.

Products, funds and fund managers shouldn’t lead our discussions, as these are the tactical solutions or inputs that are used to help us achieve desired outcomes. It’s the outcomes that deserve our closest attention, as these guide your strategic financial plan. These outcomes can be defined when we consider questions such as,

• What’s important to you in life?
• What does your desired future life look like?
• What do you want your money to do for you?
• What does financial independence mean to you?
• If you got a windfall in 10 years’ time, what would you do with it?

Once we can get clear together on these type of questions, we can then visualise the final destination that you are seeking to reach. Then we build the financial plan to help you get there. This plan in turn sets out those products and funds that are needed to get you there – think of them as simply the vehicles. You decide where you’re going, the financial plan is your map to get there and the products and funds are your means to get there. This is the order of importance of our conversations.

It probably makes sense for us to put a health warning over this at this stage. When we’re focused on where you want to go and what you want your money to do, you won’t see tempting adverts from us promising whopping returns. Because we’ve no control over achieving them. But what you will get is clarity about your future and confidence in achieving it. This will be backed up by a solid and realistic financial plan that will help you achieve your goals. Why do we approach your finances in this way? 

Because what’s important is you achieving the life / experiences that you want and not spending every minute wondering about risk / returns / performance / charges etc. Again, each of these are important, but should not dominate our conversations. Think of it like your new home entertainment system. You don’t spend your energy thinking about the electronics inside and the wiring (think products and funds), but instead you focus on the quality of the viewing / listening experience - the outcome. It’s our role to help you identify your desired outcomes, and then to help you get there.   

Please don’t worry, we also spend a lot of time and use our expertise ensuring that you have the right products and funds in place to help you reach your desired outcomes. After all, these products and funds are the vehicles that will help you get there. So they need to be expertly and carefully selected, and we will guide you through all of your choices. Alongside these, we will continually guide you in relation to your own inputs to the plan. These will probably include your levels of saving and staying focused on your long-term goals. We will help you to shut out the noise and avoid negative reactions to short-term events. We’ll help you stay focused on the big picture.

That’s our goal for 2022.  

We’ve seen quite a lot of volatility in investment markets in recent months and while many analysts are forecasting single digit growth in 2022, there is also a sense that markets will continue to be volatile. Covid is still lingering, the US & China are having their differences over trade and Brexit issues remain unresolved.

On the other hand, we want to stress again that volatility is simply a feature of investment markets and doesn’t merit panic and short-term tactical decisions. Time and again we see that investor behaviour is often a significant reason for investment outcomes not being achieved. So we’ve set out a few thoughts on some of the personal actions you can take that will help you achieve the outcomes that you want.

Keep a long term view

Your investment plan was constructed for a medium to long term timeframe. Now is not the time to forget about this. Taking short-term decisions based on short term factors runs a serious risk of undermining your carefully constructed portfolio. It should be expected and accepted that the value of your investments will go up and down in line with markets in the short term. Looking at the value of your investments too frequently can increase anxiety levels, as you see the amounts fluctuate. So resist that temptation, and focus on your progress towards your long-term goals.

Judge success against your own objectives

We’ve all heard the local bore droning on in the pub about his/her latest investment success and how insightful he/she is. What you don’t tend to hear from them are the other investment losses that they might have suffered.  Even where other people may be achieving investment successes without being insufferable about them, it’s worth always remembering that their objectives are likely to be very different to yours, and as a result their portfolio may bear little resemblance to yours. For example, they may be happy have a lot more risk in their portfolio.

Don’t judge yourself against others. Instead ensure that you’re crystal clear about your own objectives and that you have the right portfolio to achieve them. That’s all you need to concern yourself with.

Don’t try and time markets

We sometimes still get the call from a client that goes something like this, “I know my investment horizon has 8/10/20 years to run and that my portfolio is constructed with that in mind, but I really think markets are about to significantly drop because of (insert whatever you want here). I think it makes sense to get out of the market just for a while”.

Trying to time markets is folly. Success comes from time in the market. The problem when you get out of the market is deciding when to go back in! Time after time, investors get this timing wrong and end up missing significant growth as markets quickly recover from a short-term and temporary setback.

Keep saving

We stress this one to all of our clients, wherever they are on their financial journey. While the amount you save will invariably increase and decrease in line with your need to save and indeed your capacity for saving, we recommend that this is one tap that should never be turned off completely. Saving is a habit, and once you stop it can be very hard to get going again. Small amounts matter too, so never think that they won’t make a difference over the long term.

Shut out the noise

This is probably the hardest behaviour to practice, with the blaring 24/7 news cycle all around us. It’s impossible to escape the views of a constant stream of experts / analysts / doomsayers offering their opinion on where markets are going next. These views can be unsettling as you consider the impact their forecasts will have on your financial plans.

But their views are just that, their views. And their thinking is usually a reaction to a short term factor in the economic or investment environment. While at the same time, your plan is a long term one that will go through many different investment cycles. Shut out the noise, don’t react to every article you read and trust your own plan. Of course keeping this under review is a critical part of achieving your objectives, but do this in a structured and planned way instead of as a reaction to noise.

It can be hard sometimes to stay focused on the long term and not react to short term factors. But doing this is a key element to achieving your objectives.