Amanda, Head Engagement for StashAway kindly invited myself to The Octagon to hear Freddy out on “StashAway’s Market Outlook 2020” on 17 Dec. And Freddy by the way, is Co-Founder and CIO of StashAway.
One thing that people are trying to hype up the market is President Trump’s impeachment. How and how much will it affect the markets?
Here comes the spoiler: An impeachment’s effect on the markets is no difference from other political noise.
Throughout history, it was always something else beside impeachment that caused bear markets. It has taught us that for a single event to alter long-term trajectory of asset prices, it has to exert significant and lasting influence on economic growth and inflation, and subsequently on the markets themselves.
Noises and volatility are created, but they do not change the path of the entire economy. Freddy further affirms with the following examples:
Bill Clinton. The most recent Political scandal in December 1998 resulted in the Clinton impeachment. It had little or no effect on global financial markets, as they were already rebounding due to strong economic activity.
Richard Nixon. Nixon faced a highly probable impeachment in 1974, however he was smart to resign prior to that. It was a pivotal moment in US politics, but the Oil Shock of 1973 overshadowed its impact on financial markets.
An investor who invest must possess objectives stronger than just the want to earn more money. Different goals aligned to different time-frames.
Investors should focus on risk-adjusted returns; ultimately, investors are rewarded only for risks that they take. If you are not sleeping well becuase of your investment, you need to relook at your investment plan.
Freddy ended off with a few key takeaways
Guiding Principles for Long-Term Investing Success
Start with a Plan
- Keep 6-12 months of living expenses in Cash
- Invest any savings over and above cash buffer
- Set life goals (e.g. retirement in 30 years, send a child to university in 10 years or down-payment for a flat in 3 years)
- Set risk compatible with your goals and tolerance
Behavioral Principles
- Stick to your plan and invest systematically regardless of whether the markets are up or down
- Ignore the media
- Control the FOMO (Fear-of-Missing-Out) => Avoid Buying High
- Control the Fight-or-Flight response => Avoid Selling Low
Stay strong and vested. 2020 is a new fight ahead.
Theory of Constraints 