When one looks at the dollar amount invested in finance company debentures, some of this press is quite justified, but it does beg the question - what do investors expect of their adviser, and, if they receive good advice, do they adhere to it?

Fact 1:
Investment advisers do not and cannot control investment markets.  

Fact 2:
Investors need to establish a clear expectation of what they want from their investments, why they are investing, the timeframe for which they wish to remain invested and the degree of potential volatility they can handle.  This is not the first time you will have heard these suggestions and probably won’t be the last.  But then why do investors continue to make the same mistakes despite of this free advice?

“Financial planning advice” is quite different from “investment advice”.  Investment advice refers to products and returns on capital invested, usually over a short timeframe in the context of one’s life.  

Financial planning advice deals with holistic planning in order to achieve a number of goals over a given timeframe.  Those goals can be short, medium and long-term in nature.  The investments chosen to do a particular job are based around the potential to fulfil the investor’s needs over the desired timeframe, which very often is a life time.

There are volumes of statistical proof that will demonstrate one will rarely achieve a long-term goal with short-term assets and vice versa.

What has been referred to as “poor advice” is not always the fault of the adviser. The inability of an investor to maintain the necessary discipline associated with the ups and downs of long-term market trends can be a contributing factor. Some Investors lack the discipline to remain focused on the long-term and, as a result, become influenced by their fear of what “might” happen.

Having a professional investment strategy aligned with your own attitude to potential volatility is so very important. By doing so you will know where and why you are invested in particular assets and the strategy should therefore pass the “sleep test”.

So, to a degree, some “poor investment advice” can be traced back to an investor. Their inability to do sufficient initial research, answering the questions mentioned above, coupled with an inability to remain disciplined can have its impact.

It is “time in the market” not “market timing” that is important –
Research / Diversity / Buy Quality / Remain Disciplined

Contributor:  David Solomon, Director, New Zealand Financial Planning, (03) 375 4040, davids@chchnzfp.co.nz

"A Disclosure Statement under the Securities Markets Act 1988 relating to the financial adviser associated with this article is available on request and free of charge".