Investment lessons to take us into 2022

Anet Ahern, CEO, PSG Asset Management

It’s quite sobering to realise we are about to enter the third year of the Covid-19 pandemic. As we bid farewell to one year and look forward to the arrival of the next, it’s worth reflecting on some of the lessons we have learned from the pandemic.

The importance of good housekeeping

In the early days of the pandemic, decluttering our living spaces became quite the rage, and it may have inspired some changes in how we organise our homes. But good housekeeping is important in our investment portfolios too. There is a difference between investing for the long-term and letting a buy-and-hold strategy run amok with the risks in your portfolio. Remember that market movement will skew the allocation of assets in your portfolio, and you need to actively review these from time to time to ensure you have not inadvertently taken on excessive, or insufficient, risk in your portfolio.

Manage your risks

Washing your hands, wearing a mask, sanitising, social distancing, opting for outdoor seating, and vaccinating. Over the course of the past two years, we have all become experts in managing our personal risks. For investors, understanding the risks in markets has always been important, but even more so during pandemic times, when bifurcated markets have meant that some parts of the markets are very expensive while others are very cheap. We have always argued the price you pay for an asset is a key determinant of the long-term outcomes you can expect to achieve, and in the current environment, it is important to ensure you are not overexposed to some of the very popular assets investors have been chasing, and whose performance may disappoint in the future due to their inflated valuations.

Expect the unexpected

While life has always been uncertain, the pandemic has highlighted how rapidly our plans can go awry. From shifting holidays to revised travel plans, we have certainly learned to roll with the punches over the past two years. Having contingency plans in place has become second nature. Similarly, investors should be aware of the dangers of betting on a single strategy or outcome. Diversification remains the best line of defence to ensure you remain on track to achieve your long-term investment goals.

Manage emotions for better outcomes

Having your plans change at the last minute can be upsetting, but often, it is our response to situations that ultimately determine the outcome. During the pandemic, many of us had to make the most of local travel and were surprised by the gems our own country has to offer (at great prices too!). Market volatility will come and go, but it is how we manage our responses to them that will ultimately determine the long-term investment outcomes we realise. Those who sold out during the market lows of March 2020 turned paper losses into real ones and missed out on the spectacular rallies we have seen subsequently.

Technology is great, but sometimes we need the human touch

We all became adept at Zoom, Skype and all forms of online collaboration. However, the great technological leap forward has also highlighted that there are some things that will always be better in person. These days, investors are better informed than ever and can manage their investments seamlessly. Yet there is no replacing the human touch of an adviser – helping us to manage our emotions and take a longer-term view at the most difficult times. By helping us keep a cool head, we are able to make better decisions in the long run.

Thank you for your continued support, and we wish all our investors a blessed festive season and a prosperous new year.