Page 31 - Waterfall Issue 9_2022

INVESTING NOW IS

BETTER THAN LATER

By Nirdev Desai, Head of Sales, PSG Wealth

Evidence overwhelmingly shows that, more often than not, those who

invest and forget about their investments until they need them (whom

we might call ‘lazy investors’) will achieve better investment outcomes

than those who actively try to time the markets (whom we might refer

to as ‘traders’) – Behaviour Gap.

B eing a ‘lazy investor’ generally INVESTING IN TIMES OF

UNCERTAINTY IS NOT ONLY
delivers better outcomes but,
more importantly, the sooner
FOR THE BRAVE
you start the better. Doing
so allows you to have more certainty As the adage goes, “hindsight is a
perfect science” – only by looking
about your investment outcomes at past performance can one have
and be better prepared to focus on certainty about when and what the
the things you can control, namely: best investing opportunities would
• time in the market have been. Having fallen foul of the
• enjoying the benefits of Tulip bubble (when the Dutch tulip bulb
rand cost averaging market crashed), not even Isaac Newton
• having appropriate asset could have predicted that he would
allocation in your holdings, and lose most of his wealth at the time.
• having a well-defined plan for
cash flow management. Market uncertainty is the only constant
that one can count on, and media
Focusing on the aspects that alerts on market risks increasingly
you can control vastly improves serve only to heighten investors’ fears,
the rate of success in achieving causing them to refrain from investing.
the desired financial outcome. However, as Warren Buffet said, “Be
Delaying investing until later in fearful when others are greedy.” By
life frequently leads investors investing during uncertain times and
to focus on those things over which they (and their using rand cost averaging (investing smaller sums over
financial planners) have less control, including: a period of time to buy into the market at various prices
• looking for creative ways to generate more rather than investing a lump sum at a single point in time),
disposable income and capital to invest one is able to buy depressed assets earlier and, if they stay
• timing the market, and cheaper for longer, more assets can be purchased at lower
• investing in riskier investment strategies – in both well- prices. Having a clear understanding of your investment time
regulated investments and those that are questionable horizon and the period required to achieve the expected
(such as cryptocurrencies, syndication schemes etc.). returns from the asset classes you are invested in, will
enable you to afford investing in times of uncertainty.
Investing later in life also results in investors being
increasingly driven by irrational emotions, as they tend The example below is called the ‘funnel of doubt’ for
to get out of the markets when prices are irrationally equity investments. It shows that, in order to have high
low, thus permanently locking in capital losses that confidence in constantly achieving the expected inflation-
could have been recovered had they remained beating returns of equities, you need to have time on
invested over an appropriate investment horizon. your side. One sure way of being disappointed by equity
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Waterfall Issue 9 2022 29