Behavioural coaching: How to successfully invest in turbulent times

When times are tough and the future feels very uncertain – as they have done financially for quite some time now – we understandably get a lot of calls from our clients. People worry about their financial security. Will their investments bounce back? How will this uncertainty affect them now and in the future? What should they do to protect their investments? Our answer is always the same. We understand, but right now the best thing you can do is sit tight and stick to the (financial) plan.

Very few investors succeed in staying calm in turbulent markets and many end up taking exactly the wrong course of action. That’s why one of our core investment principles is behavioural coaching (you can read more on our investment principles here). It’s our job to make sure our clients don’t make rash financial decisions they may later come to regret. We take the emotion out of financial decision making. So how do you ride out the storm?

The best course of action really is to do nothing at all. This is also one of the hardest things to do, which is why we create a financial plan. This is your personalised journey planner or guide, a bespoke game plan to get you to where you want to go, both in financial terms (your investments) and in life (your hopes and dreams).

Asset allocation holds the key to investment performance

And the key to getting your investments right is not timing, it’s not even your choice of stocks, it is asset allocation. Asset allocation is about setting out how your portfolio is divided up long term between equities, bonds, cash and other asset classes and the ongoing commitment to this mix. In fact, the most preeminent research on the matter (Brinson, Hood and Beebower) suggests that 94% of investment performance comes down to asset allocation – no surprise then that this is another one of our investment principles.

Your plan sets out your asset allocation and will keep you focused on what you want to achieve and how you are going to achieve it. It factors in ups and downs in the market. It therefore allows you to pull you head up and refocus your attention away from bumps in the road and back on your long term objectives. The reality is, if you look at market performance, it more often than not exceeds its previous highs long term (you can read more about this here).

Timing the market: It’s a mug’s game

It can be so tempting to try and time the markets when things start to derail or tank, but by doing this, you will invariably unbalance your asset allocation, which long term could have a detrimental effect on your portfolio’s performance. On the flipside when markets are performing well, many may feel the need to chase performance, but the same applies.

Try not to get sucked into checking the investments every day or worse still, several times a day. If you do anything, reread your financial plan, retrain your brain to focus on your long term game plan and you will reap the rewards.