Know Your Investment Temperament
Preface
Shocked by the current market volatility? Watching one video after another on how to profit from a down turn, what to buy and what not to buy………tempted to pay a good sum of money to attend an investment training webinar?
You are bewildered by the extremely market volatility these days and worry over your investment. To cash out, to hold or even to invest more……you are not the only one. You may be hearing from many investments “gurus” out there telling you ways to ride out this turmoil or even profit from it. Unfortunately, many failed to understand, each of us has different temperament and temperament will determines how you will respond to a tumultuous time like now.
I have coined this word “Investment Temperament”. Investment Temperament has got to do with your emotions and it is in turn partially shaped by your personal financial fundamentals. The few finanaces factors affecting your emotions and ultimately your Investment Temperament are:
- How much debts you are carrying? ;
- Do you have a fall back should you lose every single cent you have invested? ;
- Are you the sole income earner in your family? ;
There could be many other factors unique to everyone.
For simple illustration, Mr. A and B have no other assets and liabilities except those illustrated in the example.
Mr. A, sole bread winner, has an outstanding mortgage of $1m, cash on hand $60,000 and an invested $300,000 in a portfolio of equity assets. Mr. B, is from a dual income household, has $250,000 outstanding mortgage, same amount of cash on hand and similarly invested $300,000 in similar portfolio as Mr. A. Both Mr. A and B investment have seen paper losses of 25%. Guess who will be more nervous?
Mr. A would most likely be most nervous as he would be pondering how he is going to deal with his $1m mortgage should he lose all his investment. I believe Mr. B would be nervous too but would be calmer as his mortgage is 25% of Mr. A and he is not the only source of income. A calm Mr. B would less likely take flight and assess the situation with good senses. Mr. B will be more capable to ride out the current rough patches.
The point here is everyone has different financial circumstances which will mould his/her investment temperament. It is important to get sound advice from qualified and trusted experienced mainstream professionals who will understand your needs and investment temperament before all else.
No amount of Quantity Analysis and investment techniques can replace proper financial reviews and planning. Do not count the chickens before the eggs are laid. Plan your fall-back position should your investment takes a beating. Most of all, avoid those investment that takes minimum efforts but give you maximum returns……these are most likely to be high risk investments.
Please contact me at WhatsApp 8750 8966 if you want to learn more of financial risk management. Please note the author only gives Financial and Insurance Planning, and Collective Investment Scheme advisory.
Written by Ray Ng, 6 July 2022
Disclaimer: All information are for informational purposes only and should not be relied upon as financial advice.