The world is full of uncertainties. How will Brexit play out? What effect will Trump’s outlandish statements and policies have on the global economy? Where is the New Zealand dollar heading? Will interest rates keep rising? In amongst all these uncertainties and more there is a large bunch of people wondering if their retirement funds are in jeopardy and whether they will be stuck in the workforce for much longer than planned. The reality is; there is no such thing as certainty (other than with regard to death and taxes); there are only degrees of uncertainty. So when it comes to making good financial decisions, a key skill is learning how to manage uncertainty.
There are natural instincts that come into play. Some people react to increased uncertainty by becoming highly cautious, some aren’t bothered at all, and some see uncertainty as an opportunity to make gains by taking risks. How you respond to uncertainty will have a significant impact on your financial outcomes.
The coming year is shaping up to be a very uncertain one. The key to being a successful investor is to learn to overcome emotions and make sound investment decisions based on objective analysis. An objective approach starts with determining your goals and the time frame for achieving them. If you have long term investment goals, don’t get distracted by short term changes in the market. Review your attitude towards risk and ensure your investment strategy is a good fit. Find the right balance between risk and return so you can achieve your goals while taking an acceptable level of risk. Stay diversified. Markets can change quickly, and moving all your investments into one asset class increases your risk.
Confident investors have a long term plan that they stick to. Just keep calm and carry on!