“The four most dangerous words in the investment world just might be ‘this time it’s different’,” Paul Nixon, head of behavioural finance at Momentum Investments, said at a recent media webinar while unpacking the findings of the Momentum Investments and Oxford Risk Noise and Investment Advice Study.
Momentum’s research shows that investors lost about R100-million and 6.5% of investment value as a result of switching to lower-risk investments in reaction to market volatility related to Covid-19 between April and December 2020. And South Africans were not alone in this panicked reaction. The Schroders Global Investor Study 2020 shows that 78% of investors around the globe made changes to their investment portfolios when stock markets experienced volatility in February and March last year.
“The problem with investment intentions is that it is impossible to appreciate in the present how we will feel in the future when we actually have to implement the decision. Saying that we will buy equities when they are 30% lower is easy to say and hard to do. When they are 30% lower it will be for a reason, and there will inevitably be … negative narratives as to why they have fallen. In the middle of that noise, sticking to a plan is anything but straightforward,” he says.
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