The top 3 investing truths I tell my financial planning clients – point blank

Most of the time, my role as a financial adviser extends beyond what most people think – dealing solely with wealth management. It is not written in the stone, but when it comes to the most important aspect, it is actually to keep emotions from creeping into monetary decisions, especially the investment aspect.

If you ask me what the next hot investment trend will be, I will almost always say, “I don’t know.” If you insist on wanting me to agree with you or go against my recommendation (which mostly focus on picking products which fits the recommended asset allocation strategies), I would only say “Thread with caution and do your due diligence”

Likewise, if you ask my view on how the local stocks markets will perform next quarter, I won’t try to guess.

Modern markets can change unpredictably at the wink of an eye, even violently at times, and we need a financial plan that anticipates unexpected or disruptive changes. Also, we need to set realistic expectations about what investments can achieve. 20% per annum for the next 10 years is NOT realistic, unless you are Warren Buffett.

And, unless you are in hedge funds, I tell my clients that we are NOT trying to beat the market’s average return — not in the short or the long term — but we are trying to outperform the average investor’s return. We do that, again, by first minimizing the impact of behaviors and emotional biases.

Here are 3 simple and honest investment rules of thumb that I offer clients:

Rule of thumb#1: One word – long term

As cliched this may sound – it is historical fact that financial markets may be volatile over the short term, but historically they produce positive returns over the long term.
It is very tough for individual investors to beat the market with any consistency. Many professional money managers don’t even do this year after year.

Rule of thumb#2: Fear is even stronger than greed

We tend to underestimate our future emotions. We think we will be greedy when others are fearful. Fear is a stronger emotion and often plays a much greater role in decision making than logic, and it often prevents us from buying in market downturn – the same it drives us to cut loss.


Rule of thumb#3: Risk is personal

Your risk in investing is NOT that you will underperform the market, or lose money in the next market downturn. Your risk is that you won’t be able to accumulate enough money to send a child to college, or that your money won’t last as long as you do in retirement.

A goldfish jumping out of the water to escape to freedom. White background.

Financial planning is not about what everyone else is doing – It is just about you.

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