Goal setting in a world of meaning

 Setting goals is all very well, but goals without a purpose will perpetuate the cycle of need and greed.

At the start of every new year, attention is often paid to setting new goals. It’s during this time that money and materialism are most prevalent. For some, goal-setting is about continual growth and striving to be better. For others, it’s a desire for more materialism in the hope that it will make them happier.

If economic differences between you and others bring up feelings of guilt or envy; if you feel trapped as if you are giving up a piece of yourself for the dollar; or if you have no idea of how much is enough, you may be at risk of one day falling prey to insatiable need and possibly even greed. And this could destroy not only your money, but also your relationships and your life.

Goals without purpose are doomed to fail – either not achieved or even if achieved,  contribute no more happiness.

A symptom not a cause

Viktor Frankl, the famous German Jewish psychologist and survivor of the concentration camps, explained in his book Man’s Search for Meaning that human beings need meaning . He gave the example of one of his friends in the camps who came to him explaining that he wanted to commit suicide. “Why don’t you do it?” he asked his friend. “I couldn’t do it to my wife,” the friend replied.
Sometimes we live for more than life itself. According to Frankl, without meaning human beings will revert to power and pleasure in the quest for happiness. We try to use these to fill the void, and having grown up in a capitalist society it is easy to be persuaded that happiness and materialism are directly related. Power and pleasure are fuelled by money, but not happiness. Happiness comes from meaning and purpose.

Purpose, goals, commitment and strategy

A purpose doesn’t need to be inspiring to others. It’s not necessarily something that will make you famous or provide admiration. It’s often very simple, and it’s always about being, not having or doing. I call these ‘deep motivators’ and we all have them no matter who we are. For example:
“To be the parent I would’ve wanted to have had”

“To share my life with a soul-mate”

“To contribute to others”

“To be the best me I can be”

“To explore and learn”

“To have fun”

A trip overseas could be the goal linked to a variety of deep motivators. Sharing the experience with a soul-mate, exploring or having fun – and knowing the real motivation is likely to not only influence the planning but also the experience of the trip itself.
Typical new year goal-setters begin with ambitious goals andthen hope that somehow they will be achieved.  Financial and health goals are often the easiest to set but usually the most common failures.
To be successful, you don’t need special talent, intellect or insight. All that’s needed is clarity around why it’s important (deep motivators), what measurable stepping stones are to be achieved (goals), a strong commitment and the ability to change strategy along the way. Purpose, goals, commitment and strategy – in that order.
Successful people are rare but their talents and abilities aren’t. They know why, they set clear goals and they are adaptable but determined. Setting goals is all very well, but goals without a purpose will perpetuate the cycle of need and greed. Goals are stepping stones to get from the present to the destination. Goals are doing and having, not being. And it’s only being that can ultimately satisfy.
As Joseph Campbell said in his book The Journey of a Thousand Faces, “The privilege of a lifetime is being who you are.” I would add, “…no matter what stage of your life.”
If you’re not conscious in your life, you cannot be conscious in financial matters.

When the swell is up, opportunities emerge

As most people make their way to work while enduring their commute, I have the privilege of enjoying one of the world’s greatest commutes – Manly to Sydney city via the fast ferry. I’ve seen whales and dolphins, but the scenery alone is amazing.

I usually catch the fast ferry which is a high-powered catamaran and creates a pretty smooth ride. But when the swell is up, I catch the old ferry, a single hull which rocks and rolls and moves up and down like a bucking bronco. It’s a bit of fun and I feel safe in the knowledge that the ferry itself is a quality vessel and the crew know what they’re doing — and that gives me the freedom to enjoy the ride.

The volatility of asset prices, being based on the swinging perceptions and emotions of humans, is completely natural. For some, the ride is very uncomfortable and they want out; for others, the volatility creates opportunities and can actually be rewarding. If the foundations are strong, it becomes a very good time even when there is apparent confusion around.

The current market volatility can appear very confusing. There’s no denying that there are many real changes in play and it’s increasingly difficult to separate them from the noise. Investors, being focused on the future, have to not only separate the fact from fiction but also try to figure out the potential long-term impact of the real issues on asset prices. It’s easy to get confused.

Trade
Trade is the biggest factor for investors, and fully understanding all the implications is complicated, especially when trade issues are in the headlines daily. With worrisome headlines, investors sell. Optimistic headlines, and investors buy.

A truce negotiated at the G20 meeting delayed tariffs on $200 billion in Chinese goods from rising 10% to 25% on January 1. But now there’s a deadline to negotiate an accord, with a deadline of the end of February. Trump is looking for structural changes on a myriad of trade and technology issues. It’s a change to the rhetoric of the past 40 years – which was previously around free trade and the ‘global village’.

The Fed
The Federal Reserve has a very big role in the US economy and therefore a big impact on market prices. It is tasked with trying to keep the economy on an even keel, and uses monetary policy (mainly interest rates) as its lever. Although rates are still at historically low levels, the Fed has increased rates eight times and its chair Jerome Powell’s comments that rates are “a long way from neutral” and “just below the broad range of estimates of the level that would be neutral” has created some uncertainty.

It’s a delicate balancing act.
If the Fed raises rates too slowly, it’s possible that financial imbalances get embedded in the system. Raising too quickly and the Fed prematurely ends the economic expansion.

Investors are self-interested and generally short term so they worry that the current approach may be too aggressive, and will slow the economy too quickly.  A classic example was evident on the 19th December when the Fed raised rates by 0.25% and announced that they expected to raise twice in 2019. After being up 300 points, after the announcement the market fell around 600 points to close down for the day. All because the expectation was that the Fed would say there would only raise rates once in 2019.

The economy, and late cycle
In the quarter to 30 September, the biggest 500 companies had increased profits of 28.3% compared to a year ago, with 77% of companies beating analyst expectations.

Analysts expect profits for these companies to rise 16.2% for the next quarter but this is down from 20% when the quarter began. It’s highly likely that some of the market volatility we’re seeing is likely related to reduced profit expectations.

A high-level view suggests that this economic growth period has had a relatively long run. Generally, interest rate increases, excessive investor leverage, and risk-taking, or government policy mistakes bring growth periods to an end. Indications are that this US economic growth period is coming to an end — but nobody knows when and until it actually happens, there will be speculation and volatility.

The Sydney property market is, in my view, somewhat of a phenomenon — not in itself, but rather in the way it is perceived. Those who have been fortunate enough to enjoy its benefits over a long period (and particularly over the past 10 years) argue that the recent price falls are irrelevant. They feel confident knowing that Sydney has a big future. These people may be surprised to know that the US stock market has outperformed Sydney property over the same time.

Price volatility is a part of life, just as the swells are part of commuting via ferry.

My biggest learnings from 2018

As the great and wise Dr. Seuss said, “The more that you learn, the more places you’ll go.” As humans and as advisers we need to continually learn and grow. If we don’t, we stay in the same place for years and stagnate. You’re growing, or you’re going.

 

2018 feels like it has been a particularly strong ‘growth’ year. It’s been one for contemplation and growth and I feel like, after being tested fairly significantly, we have learned a lot and come out stronger.

 

There have been many learnings for me 2018; some from observation, others from pain. Some are new but many reminders. In no particular order, here’s just a few:

  • It’s tough to go against the crowd, and it never gets easier.
  • Clients appreciate direct feedback.
  • Real value comes from real listening. And listening with your ears alone can be misleading. Human beings don’t always use words to explain what they really mean, and often don’t even know what they really mean.
  • The internet was built to be unstable and accessible, and that makes it impossible to keep the bad guys out. We need much greater security around assets.
  • Geopolitics is never the core issue behind price changes.
  • I wish I was interested in fewer topics.
  • Push your strength too far and it becomes a weakness.
  • Access to the right investments is the most undervalued service.
  • The most valuable advice is often the most surprising.
  • Talking is easy; communication is difficult.
  • The most common thing about clients is that they’re all different.
  • Nobody values the foundations no matter how hard they are to lay.
  • I can spot a typo from 30,000 feet.
  • Busy does not equal productive.
  • It can take a while, but assets can’t remain overpriced forever.
  • Sometimes the process of making a decision can be fun.
  • Even though I have done eight years of study, I’ll have to do another two.
And last, after much thought and analysis, I learned that I want to continue working with clients in an advisory capacity for the next 10 to 15 years, but with a greater focus on life strategies.

What surprised me this year:

I had no idea the royal commission was going to blow the industry so wide open. (There were no exposures that I didn’t know but it feels good to know our approach has been vindicated).
Trump’s tariff war seems so unsophisticated and the impact so obvious, but maybe I’m missing something.

A new app for spouses, or anyone in a conflicted relationship, especially divorce. It warns the sender that a text message may be misinterpreted by the reader and result in an adverse reaction, and suggests how to reword it.
Being rated the 29th best adviser in Australia in the Barron’s top 50 advisers (It’s nice but I’m not sure these surveys can ever be correct).
The 12-month returns to September 2018. I thought they would be lower.
The wonderful responses to this weekly Thinking About blog from clients.
What didn’t surprise me:

The price correction in Sydney property or US stock market.

 

As I reflect on 2018, it reminds me how much I appreciate the fact that I can actually reflect on this, and on the life we live in Australia. It has been quite a difficult year in many ways and in the ‘heat of battle’ it’s often too easy to lose sight of the real issues and get caught in the noise.

 

It has been a year of building stronger foundations at Sentinel Wealth, and I feel that we are ready for a very good 2019 and am already looking forward to it. I’d love to hear your learnings and surprises for 2018.

 

Beliefs about Christmas and money

If the holiday season fills you with dread as financial conversations emerge with well-meaning family, there is a way to make those moments more interesting, and less challenging. It comes back to understanding what someone’s money beliefs are.

I caught a taxi recently and as we started driving we encountered a traffic jam. “I hate this time of the year”, the driver said. “Christmas fever – everyone goes mad. It’s terrible!”

“What’s the likelihood of you enjoying the next four weeks?“ I asked.

“I doubt it,” he replied.

As I got out of the taxi, I felt sorry for him. Although understanding what he means, he has set himself up for an unnecessarily difficult time. He has convinced himself that the next few weeks are going to be crazy, that he’s going to have passengers arguing with him, and he’s not going to enjoy it – all because of his beliefs. It’s also likely that if anything happens he will use it to confirm his beliefs and exaggerate the impact.

Many people have the opposite beliefs about this time of the year. They love the holiday period. Often these people can be heard saying something like, “it reminds me of my childhood.”

The correlation between beliefs and outcomes is very high, and confirmation bias reinforces and conflates the outcomes.

Beliefs are formed in early years, usually from emotional experiences (particularly those where joy and fear are present). At the time, the emotion almost  ‘glues’ the belief to the subconscious. And it becomes very difficult to move.

Money beliefs are also correlated to outcomes, and many are likely to be reinforced during the holiday period, and it is at these times that family elders pass on their money beliefs to the next generations. The elders will never know the impact they’re having – their beliefs are ‘the truth’, so they’re doing the young a favour, right?

Whether a money belief will be supporting or limiting should be left to the believer themselves to determine. It’s not for the listener to decide. They have their own beliefs.

Limiting Beliefs
Overall, though, there are a number of beliefs that I’ve found are generally accepted as being limiting or destructive:

– “Good people don’t care about money, and aren’t materialistic.”
– “It just has to be done, regardless of the expense.”
– “The cost of the gift shows the value of the relationship.”
– “Money will solve all my problems.”
– “It’s only money.”
– “Your self worth equals your net worth.”
– “Somehow, it always works out.”
– “People judge you by how much money you have.”

More valuable and fun conversations
Unfortunately, research shows that the holiday period is a time of increased stress for many people. As family members get together, often having not seen much of each other in some time, conflict in conversations may arise. It’s often a clash of beliefs that each person in the conversation is convinced is the truth.

An interesting and fun change to these conversations is to raise the topic of money in the form of experiences.

“What’s your first memory of money?” is a question that elicits very interesting responses. Critical, however, is to let it flow without interruption. Be the inquisitive listener, nothing more. It’s not about telling them their memories are wrong or their beliefs irrational. It’s not about proving anything. It is simply about enhancing understanding and being interested.

After the story about their first memory, ask what impact it had. Then ask whether that impact has served or limited their relationship with money.
Even between spouses – there are insights to be gained and relationships will be enhanced. These are the conversations that can make family gatherings more enjoyable, and enhance relationships.

One of the most powerful and valuable learnings to pass on, is awareness.

When I think back to my taxi driver, I still feel sorry for him. He has chosen a job that puts him in the middle of the movement of people and as he wakes up every day, he sees the world through a negative prism. I wonder what the knock-on effects of his daily beliefs are on aspects of his life that are more important.

But maybe, that’s just what I believe.

How old are you as an investor?

Watching television recently, I learned about something called ‘the phenotypic age’. Apparently, it’s the physical age of the body, not the chronological age. It’s the age at which your body is functioning. Some people are unfortunate to have prematurely ageing bodies, and others are lucky. Some work on their bodies to keep them growing and others abuse their bodies and bring on premature ageing.

Blood tests measuring eight elements can now reveal how old our bodies are, and can accurately predict how long we will live. It would be interesting to have a test that measures how ‘mature’ a person’s personality is around money.

In my experience, some investors just do better than others — they take more risk, they accept costs, and they don’t panic when prices fall. They’re ‘mature’. For many reasons, and for reasons that are mostly not their fault, others struggle.

Three categories of investors

There’s a lot of research on investor behaviour and, in my view, investors fall into three categories. Those that understand what it takes to do well, and do it; those that have made mistakes and learn from them; and those that don’t learn from their mistakes, and keep repeating them.

The first group — the ‘adults’ — fall into two sub-categories. The first understands how risk and reward are linked. They’re not afraid of risk, because they understand the basics of capitalism. They know that they could lose money but they believe in the power of business and human beings to create growth. Some are very experienced at making money; others are simply used to the volatility of markets and have benefitted from long-term patience. The second sub-group of adults is accepting of the nature of markets, and trust the structure of their portfolio to others. They are relaxed, even though they are not experts.

The second group — the ‘teenagers’ — have made mistakes and although they have struggled, usually make improvements. They have often paid quite a heavy price, and have regrets. They wish they could have their time again — because they would have been multiple times wealthier. At least they’re on track and feeling better. They’re learning.

The third group — the ‘children’ — haven’t changed. They have made mistakes, but they continue to make the same mistakes over and over again. They don’t learn. Often it’s because they feel out of control. They usually follow the same strategy that doesn’t work, which could be the ‘get rich quick’ strategy that always blows up, or the ‘keep it in cash because the stock market is too risky strategy’, or the ‘pick an adviser because they seem nice’ strategy.

They either make excuses, or they don’t care. One way or another, this group is destined to fail financially and they need to be protected. Those around them will find it difficult.

Changing who you are isn’t easy

How do you become a member of the first group?

  • Become aware of your beliefs and where they limit your success
  • Get educated
  • Speak to people in this group – understand how they think, more than what they do
  • Start small – practice and entrench one good habit
  • Be clear about why it’s important to you.

How do you get out of the third group?

  • First, decide if you care
  • Then, accept it’s all under your control
  • Uncover your money beliefs
  • Don’t judge yourself
  • Create the life you want and set some targets
  • Get help, and hand over control – in the short term

Every investor is different. No matter how old they are chronologically, some always remain child investors. Unfortunately, like children, they will also end up dependent on others, and will give up their freedom. The best way to help a ‘money child’ is to casually discuss their memories and beliefs around money and help them to remove any blame. Then focus them on what kind of lives they want, and finally, on the strategies they need to implement. It needs to be their decision.

 

Aviate, Navigate, Communicate

Soon after I got my private pilot’s license, I subscribed to a monthly publication that outlined aviation incidents and accidents. I initially read them as a dutiful new pilot, but soon it was more for the incredulous stories. Most loss is caused by human error and most human errors are the result of stupidity, not risk. ‘Stupidity’ comes from losing control under pressure.

There was one guy who decided to impress his mates who were having a barbecue on the side of a river. He thought it a good idea to fly up the river and under the power lines — he clipped the tail of the aircraft and plunged to his death.

Some accidents are due to aircraft failure, weather, or someone else’s fault, but a surprising number are pilot error. The key principle taught to new pilots regarding how to deal with pressure is “aviate, navigate, communicate”. In other words: first, keep the aircraft flying; then worry about where you are going and only then, talk to the people involved.

I had the unfortunate necessity to use this principle twice in the air. On both occasions we had engine problems – both were life-threatening. In fact, the second was a take-off from a bush airfield in the Kruger National Park with my family on board, and we were flying at treetop level. ‘Aviate, navigate, communicate’ kept me very focused.

This simple principle can be adapted to any situation in order to reduce human error. All it does is help you remain sensible to give you the best chance of a successful outcome. Why make it more difficult than it needs to be.

A critical first step, however, is to be aware of the situation in which you are operating. Known as ‘situational awareness’, it’s the ability to be aware of where you are, what’s happening around you, and whether anyone or anything is a threat. And if there is a threat, having a method to remain in control in order to deal with it.

There is an enormous amount of research that shows that investor behaviour is the greatest contributor to investor returns. When asset prices fall, investors panic. They lose control of their emotions and their decision-making suffers. Money is highly emotional and as a person’s wealth or their perception of their wealth changes, their emotions are exaggerated.

Under financial pressure, ‘cash flow now, cash flow future, communicate the plan’ is similar to the pilot’s mantra that can be used. ‘Cash flow now’ is all about surviving the short term; ‘cash flow future’ is where your revenue will come from in the future, and ‘communicate the plan’ – keep everyone in the picture.

There is always a perception of risk but in reality, the past 10 years have been particularly benign. Recent times have been more testing and as usual, we have seen a higher number of views on how to deal with it both with our clients and across the market.

The principles or mantras I’ve discussed will apply to any situation. I used them when teaching my children to drive. “Aviate, navigate, communicate” I would say in the car. “If you’re in the car with your friends on a Friday night and you’re all excited, remember that if anything goes wrong, focus on driving the car, then pull over or turn down a side road, and then worry about your friends”.

It’s worth simulating or introducing a stressful situation to help learn. For her first lesson, I took my daughter on a two-hour drive on a Saturday morning down the busiest roads in Sydney. “What’s the worst that can happen?” I said to her. “If you’re feeling pressure, just slow down and drive the car – they’ll hoot at you, but who cares as long as you’re in control of the car?”

Being able to master emotions can help you focus on the necessary outcomes from any decision you may need to make. Being able to take control in a stressful situation can only help further, whether you’re struggling to land a damaged airplane or managing finances in a downturn.

The October Effect

Is the ‘October Effect’ real?

The human mind is the biggest obstacle to on-going, long-term successful investing. It’s a phenomenon that impacts not one investor, but many, all across the world — for an entire month. Welcome to the ‘October Effect’.

It’s been another volatile October! What is it about October over all other months? The stock market crash of 1929 started in October and ushered in the Great Depression. Black Monday 1987, also October, was driven by computer trading and portfolio insurance and in October 2008, the S&P 500 Index lost nearly 17% — the biggest monthly decline of the GFC.

Few would know but there was also a minor panic in October of 1907, during which the Dow Jones Index lost 15%.

It’s no surprise for those that subscribe to the ‘October Effect’ – the belief that the stock market often declines in October.

There are many theories about the stock market, and the October Effect is just one. Each is compelling and difficult to resist, especially when being explained by a keen proponent. On the other hand, logic suggests that if any were correct, all investors would soon follow and it would lose its impact.

The October Effect

Besides the October falls mentioned above, between 2009 and 2017 we experienced three October declines, each losing just under 2%. In the six periods that saw an advance, the S&P 500 averaged a 5.3% advance.

This year was different. In October the S&P 500 Index gave up 6.9%.

Even though many think that it was the result of the October Effect, the 2018 price fall could have been the result of a number of factors, or a combination. The US market has had a 10-year bull run without a correction, whereas corrections occur on average twice every decade. Investors are getting nervous. The Fed chairman Jerome Powell’s comments that the fed funds rate is “…a long way from neutral at this point”, alludes to the fact that China is slowing down and growth in Europe has softened, implying that firms doing a significant share of business with these regions could face reduced profits. These concerns, together with the nervousness around October, can cause price falls.

Investors who believe in the October Effect would completely discount the S&P 500’s 8% advanceinOctober2015, or the fact that from 1970 the broad-based index of 500 major US stocks has averaged a gain in October. In fact, October ranks number three in performance when using the median return.

In case you’re wondering, on average, September is the weakest month.

But why does it really happen?

My view is that there is, in fact, no difference between October and any other month. The October theory is based less on evidence and more on what psychologists call ‘availability’ — the human tendency to judge how likely an event is by how easily we can recall vivid examples of it; and framing, where “people react to a particular choice in different ways depending on how it is presented”.

Defensive assets generally do better and stock analyst earnings forecasts are less optimistic in autumn and winter — the darker months.

In other words, investor psychology is the real explanation of price volatility. Successful investors are those able to not only understand the psychology of investing but also be aware of when it’s having an impact on themselves and others.

Human beings find it remarkably difficult to simply allow a set of facts to exist in a vacuum. There is always a need to create a story to explain the facts.

It happens all the time

The S&P 500 lost 9.9% from closing peak to trough (20 Sept to 29 Oct) and although it’s never pleasant to watch the value of a portfolio fall, the fall was actually quite modest.

A fall in prices during the year is not uncommon. Since 1980, the average drop from peak to trough in the stock market during the year has been 14% and in recent years, we’ve experienced a number of sell-offs. The stock market has weathered Brexit, the European debt crisis, China worries, the Ebola scare, the Japan earthquake/tsunami/nuclear disaster, US debt downgrade, and much more.

When in doubt, rely on what’s indisputable

Shares are much higher today and over time will continue to rise. Capitalism is one of the laws of humanity (in my personal opinion), and capitalism suggests that companies as a whole will continue to make a profit and will, therefore, have a long-term upward bias. The over-optimism or pessimism of human beings will be reflected in the prices, and those that can discount both and resist the illogical theories will avoid bad decisions and benefit the most over the long term.

Decisions should be based on factors that can be explained and are easy to understand, not on fanciful theories — even though they are sometimes fun to hear.

 

 

Hot Days Lead to Bad Decisions

Awareness around factors that lead to bad decisions can help investors remain cool when markets heat up.

As we move into summer, we are starting to experience some very hot days. Anecdotally, everyone knows that we all get a little more cranky in the heat — but there has been much research on the topic. In fact, one study in the USA on the impacts of hot temperatures on road rage showed a direct correlation.

It must have been a fun study to do. The research team purposely irritated drivers by remaining stopped at green traffic lights and then measured how many people honked their horn and shouted abuse on days with varying temperatures. They also measured the difference between cars with windows down (the assumption being that air-conditioning was not being used), and up. It must have almost been like Candid Camera.

Called ‘heat hypothesis’, there is statistically a direct link between hotter days and greater ‘behavioural errors’. Another study in Spain showed an increase in road accidents of 7.7% on days of extreme heat. There is also a correlation to murders, assaults and car thefts.

Awareness of additional risks is the clear antidote to being susceptible.

Poor decisions often come from a poor decision-making environment

Lead researchers discovered that the real cause of the increased road rage and violence is that heat causes discomfort. When uncomfortable or out of the comfort zone, human beings become irritated and emotions are heightened. This often means the survival instinct kicks in and threats are exaggerated.

Money is similar to heat — it exacerbates and exaggerates emotions

With the markets and asset prices becoming more volatile, but no consistency of themes occurring, we are seeing more and more behavioural errors occurring. The environment within which investment decisions are being made is becoming less conducive to good decisions, and a number of common behavioural errors are the result.

Myopic loss aversion: Investors experience emotions of losses twice as significantly as those of gains. As a result, when prices become more volatile investors become too strongly focused on short-term losses and exaggerate their impact. Together with recency bias (where investors assume the recent past will persist in the long-term future), this emotion often leads to the error of making rash short-term decisions which have a long-term cost
The antidote is to reframe the short-term losses. For example, by looking at the frequency of previous similar losses and the subsequent recovery, as well as refreshing the principles on which market returns are based.

Mental accounting: In their heightened emotional state, investors evaluate their investments separately rather than as a portfolio. They look at each investment in a time-specific way, expecting each to be doing well all the time. The emotions of mental accounting, when combined with loss aversion, result in investors holding onto losers and selling winners.
The antidote is to focus on the returns of the portfolio rather than individual returns, and on the quality and diversification of the underlying assets.

The halo effect: The uncertainty of a volatile market leads investors to seek out a ‘hero’. At the same time, ‘experts’ expound their theories in the media, which together with the local grapevine, leads investors to look for the silver bullet. The impact of this effect can be seen when companies with familiar names trade at higher valuations than companies or ticker symbols that are more difficult to remember. The likeability of a CEO has a similar impact, as does the endorsement of a well-known investor. As I often say to our clients, “trust the process, not the people”.

Volatility doesn’t mean long-term outcomes should be poor

The past 10 years has been a particularly benign and fruitful period for investing. Volatility has been lower than average and returns higher. On a relative basis, it is unlikely to be as good over the next 10 but this does not mean that the final outcomes should be any worse.

The greatest contributor to investment returns is investor behaviour, and the greatest contributor to quality decision-making is awareness. As we go into a hot summer and more volatile prices, those that have the awareness that hotter days lead to hotter emotions — and therefore greater risk — will be less likely to make bad decisions.