Cage The Lizard
As the markets start to bounce, we’re seeing the questions creep in, with people asking whether they should sell now, and buy back in lower down “when the market falls again”. Or they’ll ask whether the market has gone too far, and if now is the time to hold cash.
Now is the time to cage the lizard. But how?
For us, having a team rather than individuals is crucial in this, as it mitigates the problems that can come with a star manager, no matter how smart and focussed he or she might be.
Most of all, though, we have a tried and tested investment process, designed to deal with uncertain and fast-moving markets. Part of the process is quantitative, looking at dashboards and models covering different economic and market indicators. Part of it is qualitative, discussing policy, views and trends rather than hard numbers. And part of the process is ensuring that we are talking to one another, that information and views are shared clearly and honestly.
This lets us – makes us, even – look forward, rather than back. It keeps the lizard in a cage, and lets the reasoner do the thinking. We are confident that our ability to keep the lizard under control and avoid emotional responses to markets will lead to smoother investment returns in the long run, and work to the benefit of all our clients.
Of course, caging the lizard won’t be, and isn’t, that straightforward for everyone, particularly for someone who’s scared. The desire to hold cash comes from a psychological place. Our latest research piece, Why cashing out could mean missing out aims to help people with this challenge. Using hard data from the past, it aims to calm investors’ inner lizards by helping them understand the long-term impacts of irrational decisions based on fear versus ones based on reason.
You can read this piece and discover more insights from 7IM at www.7im.co.uk.
