An intro to the friend you didn't know you had...

Buon Anno...I hope you had a relaxing Christmas and New Year and are ready for the shenanigans of politics which await us in 2019. 

I took some much needed time off during the New Year period and went to the mountains to get some fresh air away from the smog of the city. It's amazing the effect that the increased oxygen level and clean air has on the body. I felt like I had twice as much energy, although it is probably just the thought of getting back into work and Brexit thoughts which preoccupy me once again.   

Going through these different states of emotional wellbeing gave me an idea for this blog, because it was during the last few weeks of 2018 that I got contacted by a few of you who were naturally concerned about falling financial markets and the effect on your invested money. For obvious reasons, when markets start to sell off it makes people nervous, myself included; anxiety levels change and stress levels increase. As I have repeated often: you have worked hard for your money and you don't want to lose it, so seeing the valuation of your portfolio fall is a hard thing to accept. I go through the same feelings. It is never easy for me to see red figures in my portfolio either. 

It was with this that I thought I would introduce you to 2 characters who I have known about for a long time. The first is Mr Market and the second, Mr Media.

THE STORY OF MR MARKET

So let me introduce you to the loyal friend you didn't know you had: Mr Market

When your portfolio was set up, you were partnered with a chap called Mr Market who wants to buy your portfolio from you. Mr Market is a very accommodating chap and incredibly loyal. He is with you every single day and every day he will give you a price for your portfolio and ask if he can buy it from you. You are under no obligation to sell to him, or buy anything else from him. But, he will give you a price for your portfolio every day.  

However, there is one important thing to remember about Mr Market.  He has incurable emotional problems. Some days he is very excited and other days he is very depressed. There is no telling how he is going to be on any given day. 

You only need to know one thing about Mr Market: It is his wallet that you are interested in and not his wisdom! His wisdom has no logical sense. It depends on how he feels on any particular day. 

 
You also need to make sure that you don't fall under his influence. He can be very convincing and his emotional swings can be very infectious. Equally, he can be very tiring can cause you great anxiety.

When he is euphoric, he will only tell you great things and offer you a really high price for your portfolio because 'he' is concerned that you will continue to hold those assets and gain from the future growth of them and he won't be able to. 

At other times, when he is depressed, he can see nothing but trouble ahead and he will offer you a really low price because he is convinced that you are trying to offload your portfolio onto him, even if it is not the case. However, under these conditions, the more depressed he becomes the better it can be for you. He will offer you ridiculously low prices and, for the prepared among us, we can snap up those bargains before his euphoric mood returns and his prices rise.  

MR MEDIA

And let's not forget Mr Media. He is Mr Market's best friend. Mr Media takes all his information from Mr Market and shouts, publicises, and writes everything that Mr Market tells him.  Every day Mr Media wakes up, calls Mr Market and then reports whatever Mr Market has told him, even if it has no logical sense. Mr Media just wants to report...anything! One day markets are up 100 points. They tell you to buy everything. The next day they are down 100 points and they tell you to sell everything.

Your task is to not fall into their trap, because Mr Market and Mr Media are working to try and get their hands on your money. They know that you will benefit from being an investor in those assets, and so they will try everything possible to get you to sell your portfolio.  All they want to do is buy your portfolio from you at the lowest possible price. Your job is not to listen to them, but to understand why you made your investment decisions in the first place.

Mr Market and Mr Media are everywhere, every day. It's hard to ignore them and sometimes we get sucked into their manic depressive behaviour. That's why I am here. To help you blank them out and focus on your real objectives. Human emotions often move contrary to your economic interests. We need to school ourselves to go against the crowd and even against your 'own' feelings (much harder, admittedly).

MY OWN STORY OF INVESTING

I think you will understand the point of introducing you to Mr Market and Mr Media. However, it's probably a good idea to share my own story, in brief, of how I got into their world. I like to 'walk the walk' so to speak and I think it is good to share some of my successes and failures. Fortunately. I learnt some pretty important lessons before I started doing this work and it gave me a great foundation. If you want to read my full story you can do so on our website HERE, but here is a quick overview.

I remember my first investing experience when I was a teenager and my Mum and Dad had been advised by a friend to invest in NEXT (the retailer) stock. The price had bombed to 9p a share and my Dad's best friend told him to fill his boots. So he did. The euphoria in the house was tangible because that stock rose up to 99p before my parents sold. I don't know how much they invested, hence what profit they made, but I know they did OK. My interest was piqued!  

My Dad's best friend next advised him to buy into 'Fulcrum Bedrooms and Bathrooms'. I can't believe I still remember the name, but my parents didn't have any money to invest because they were doing house repairs (probably using the profits of NEXT shares) and so I bought them. It wasn't much by today's standards, just £200, but I invested nonetheless. To be honest I forgot about them and never really tracked them. About 2 years later I got a winding up notice. I had lost everything. It wasn't a great start, but I wasn't deterred.  

My next venture was some money which my grandparents gave me, £3000. This time I went to the bank and asked them to invest it for me. The financial adviser advised me to put it into a growth fund. I did, and forgot about it again. I finished my studies and then travelled the world for over a year. I arrived back with some debts and remembered I had this money. I returned to the bank to be surprised to learn that it had tripled in value, which helped me clear my debts. 

I had now started work and had some more money to invest and it was around the year 2000: the tech boom. You don't need much knowledge of financial markets to guess what happened. In 2000 the tech market collapsed. I didn't lose my money. Its value had just fallen, considerably. I switched it into something very speculative to try to regain the losses. It worked and it still sits there today. 

It was from that point onwards that I moved into financial services, having learned some pretty important lessons. The first is not to get carried away with what Mr Market and Mr Media tell you. Secondly, to not take advice from well-meaning friends and family, and lastly, that investing wisely and for lengthy periods of time brings the required gains and financial security (in my case to clear debts). However, it does require patience and staying power when seemingly the world around you is losing its head.

I wanted to tell you this because it's important to know that we are working on the same page and markets don't always go up, but I fully understand the implications when they fall. Capital protection is the most important factor, even when markets are falling.