Who Else Is In The Room?

In many social settings, conversations often turn to investments. Picture it, the room is crowded and noisy and it can be easy to lose your bearings and walk away filled with self-doubt, envy and fear, while everyone else seems to be filled with confidence and self-assuredness.

What is going on? Who are these people? More importantly, who am I in relation to them? There is a mental strategy that you can apply that may help you in these circumstances, which inevitably occur, regardless of who you are.

Many types of investors
From Dave Day Trader and Momentum Maria to Rosie the (soon-to-be) Retiree, everybody seems to know what they are talking about. None are quite as convincing as Cynical Cyril, but then it is always easier to shoot ideas down than to build them up.

Dave Day Trader is most likely part of the news and trading rollercoaster. He gets his information from the various 24-hour business news channels and services that are designed to encourage as much drama as possible. He watches and buys and sells and watches in a feeding frenzy of sorts. Maybe he makes money some days and you will hear about those days, but you will not hear at the dinner table about the days he loses.

Momentum Maria is buying up anything that looks like it has momentum, today that might be shares in AI platforms or, perhaps, crypto. You might also be able to spot Maria because she is studiously avoiding discussing something that she was talking up last season, maybe property. Her timelines and her thinking are faddish and seasonal: this season, last season.

Then there is Claire Currency Trader. She is also hoping for as much action as possible, but not just daily; Claire measures her performance at 15-minute intervals.

Another of these characters is Daisy the Derivatives Trader. A rarer creature, Daisy can make money when prices and markets go down. She says curious, attention-grabbing things like: “When the stock price went down, I made a lot of money on a short position.”

Other investors who will talk a hole in your head at dinner parties include Alan Asset Manager. Alan will talk about the latest results season (quarterly, half year, annual) and how much the portfolios he manages made on certain stocks. Maria is focused on “everybody piling into” whatever looks hot.

Remember always that you are one of a kind, as is the guy who is about to sell his business, as is Rosie, who is about to retire (very comfortably, it seems). Their timeframes seem to be 25 to 30 years from now, she is concentrating on having enough money through her lifetime. Hopefully, whatever it is they are doing is carefully aligned with their lifestyle and their investment goals, their timeframe and tolerance for risk, in both the short and the long-term.

So how can you stay ahead in the social scene stakes?

1. Hit the pause button.
2. Take a breath.
3. Ask some questions. There are a couple of key questions that will help you to quickly identify the various players, namely:

• What is the investor’s goal: Are they hoping to make a quick buck, or is this investment part of a longer-term plan?
• What is the timeframe of this investment: 15 minutes, a day, a month, a quarter, a year … 30 years?
• What sort of events or news flow is this investor reacting to?
• Does it sound like your own investment plan?

Be warned: Ego + Fomo = Loco
Doubtless, these characters can all be described as investors. Some of them might also be called gamblers, speculators or opportunists. Whatever they are, they are not YOU, their goals are not YOURS.

Remind yourself that you have a carefully calibrated plan designed for you and by you. Our clients will also know that many (not all) of the opportunities being chased by the various investors described above are already within in your portfolio.

The conversation around investing is always full of noise, thanks to such a variety of investors who all seem to have something to say. For every story of someone making a windfall, there are many other (usually untold) tales of woe from those who lost their shirts. Do not let the ego-driven stories trigger your fear of missing out (fomo) and make you lose your head (go loco).

Enjoy the conversation and take it all with a pinch of salt. Ask a lot of questions to try to figure out what kind of investor each one is. Then you will be able to resist the social pressure and stay in your own lane, which has been designed around you, your dreams and timeframes.

If you still need convincing, consider this: Morgan Housel, bestselling author of The Psychology of Money and Same As Ever talks about “an average return for an above average period that leads to magic”. The magic he is talking about is compound growth and he is revisiting the genius of Albert Einstein, who said, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

Above average might sound less compelling than “made a killing” and “shot the lights out”, however, imagine it is the likes of Housel or Einstein telling you this at a dinner party. Even then, we would say, remember who you are, what you are trying to achieve and your own time frames.