Investing in the age of 24-hour news

We’re all exposed to the 24-hour news cycle these days. Whether it’s a story predicting a global economic downturn or national party politics impacting the dollar in your hand; the more eye-catching the headline, the more we’re likely to read. And while the news does a valid job in keeping us informed and entertained, it’s not always the best source of information to act on, especially when it comes to investment decisions.

Yet how do you stop from panicking when a headline shouts of recession and financial crisis? Suddenly the retirement plan you’ve been working towards for years looks like it’s about to halve in value. Of course you’re concerned and you want to protect yourself.

But before you act in a way that may backfire on you as an investor, ask yourself these questions:

Does the news article contain genuine and far-reaching information or is it cynically chosen to keep you interested?

Will the story you read today have a substantive impact on the health of your investment portfolio tomorrow?

Is it enough to consider reviewing your investments or asset allocation?

The quick answer is don’t believe the hype in the press and seek out an expert for advice before you act rashly.

Remember that markets will react to breaking news immediately, meaning prices are affected quickly. So the chances are that by the time you’re reading about it, the markets are already onto the next event.

If you act on news that’s already priced into markets, it can be counter-productive as a long-term investor.

The risk is something else then happens and all you’ve achieved is to realise a loss.

Remember too, that it pays to speak to an expert. A knee-jerk reaction is short-sighted and fails to take into account any long-term view that went into creating your investment strategy.

The chances of making a rash financial decision are hugely diminished if you’re working with a financial adviser who can provide support in worrying times so you’re able to stay disciplined.

Our expert advisers use a unique methodology to create a portfolio that is relevant for your time of life, based on your current circumstances and adjusted for your attitude to risk. We are with you for the long-haul and our investment philosophy reflects that commitment to a personal relationship.

When the Global Financial Crisis (GFC) hit in late 2007, many investors were worried, including our clients.

But unlike most, our clients saw out the GFC with a great deal of comfort.

This was due largely to the fact that their investment portfolios still delivered much needed cashflow even when the markets were in free-fall.

This is achieved by separating a client’s portfolio into three investment buckets – cash, fixed-interest and growth.

The cash bucket holds 12 months’ worth of income. The fixed-interest bucket holds two to four years’ worth of income in low-risk assets. The growth investment bucket holds the five-year-plus growth portfolio. This is where we hold capital investments that are subject to market volatility.

During the GFC, those volatile capital investments, so necessary to deliver growth in a long-term investment plan, were quarantined in the growth investment bucket which meant their fluctuating performance didn’t impact on the separately held reserves of cash and fixed-interest.

These reserves continued to deliver income so that clients had plenty of liquid funds available to meet their cashflow needs.

With this approach, our clients avoided having to sell at a loss to top-up their cash reserves during the GFC. Instead, they held onto the long-term growth investments which eventually recovered in value.

At First Financial, we create investment portfolios that are robust enough to withstand market volatility while still delivering income.

For a retiree that means cash in hand when you need it. For those who are younger and focused on accumulating wealth, this strategy means you have a portfolio geared to growth, to serve you well long-term.

Our innovative and unique investment strategy consistently delivers great long-term outcomes. This is because at First Financial we always put the client and not the headline at the centre of the story.

To start a conversation about your investment future with a First Financial adviser, contact us here.

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