It’s been an uncomfortable year for equity investors to say the least. Stock markets around the world have fallen, some more than others. Russian stocks have crashed, and investors in some funds have been unable to get their money out.
That human beings have an inbuilt tendency to look for and favour evidence that confirms their pre-existing beliefs – about investment, politics, or any other subject – is not a particularly new or radical idea.
You’re sitting in your favourite restaurant, feeling famished. The waiter arrives and reads out a long list of mouth-watering specials. Yet the moment he walks away, you find you can recall only the last item on the list. Congratulations, you’ve been struck by recency bias.
It’s now half a century since the American writer Alvin Toffler released the best-seller “Future Shock”, about what happens to societies overwhelmed by rapid change. While not claiming to be prophesy, Toffler’s book still resonates 50 years on.
It’s infrequently remarked upon in the financial media but many of the keys to success as a long-term investor derive from qualities that are distinctly out of tune with the times – patience, discipline and a readiness to prioritise distant rewards over instant gratification.
The global pandemic has brought into sharper focus the concept of “financial wellbeing”, a holistic measure of personal security not typically captured by investment returns, consumer spending and saving data or macro-economic aggregates.