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A message to investors: Get active and get educated
Investors caught up in the COVID-19 era would be wise to remember that wealth is the transfer of money from the ignorant to the well informed, a chief analyst has said.
A message to investors: Get active and get educated
Investors caught up in the COVID-19 era would be wise to remember that wealth is the transfer of money from the ignorant to the well informed, a chief analyst has said.
Dale Gillham, chief analyst at financial services company Wealth Within, has flagged that it’s inevitable “that when the sharemarket falls heavily, we see an increase in the number of people questioning not only the stock market but their advisers and the products they have chosen to invest in”.
He said that in the past, investors would typically do what he calls the “dump and run” strategy: Investors had an investment or financial issue that would be dumped on an adviser because they preferred not getting too involved in the process.
“Their expectation, at the time, was that the financial planner would ensure they get a consistently good return on their money,” he explained.
“But when the GFC hit and that did not occur, investors blamed their advisers, with many believing they could do better with their investments,” Mr Gillham noted, which resulted in a huge amount of money moving away from traditional superannuation into SMSFs.
It has led the analyst to consider whether investors have done any better for themselves in the latest market “meltdown”, thanks to COVID-19.
According to Mr Gillham, investors are now savvier than they were 10 years ago.
“They understand that markets move up and down.”
“Further, they understand that taking an active approach to managing their investments yields better results than the passive dump and run process of the past,” he added.
That said, the analyst said they also realise that to achieve better results, it is essential to educate themselves and take an active role.
From Mr Gillham’s perspective, a large number of investors have shared with him that they are doing well, “and by and large, these are the educated investors”.
He’s also hearing from a “considerable” number who aren’t doing so great “as they are emotional and making poor decisions”.
“Unfortunately, many of these investors are uneducated or ignorant as to how the market and investing works,” he conceded.
This is when Mr Gillham impressed upon the importance of remembering that “wealth is the transfer of money from the ignorant to the well informed”.
Because of this, he is very encouraging of any investors wanting to take an active role in managing their investments “to get educated”.
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