Boring is exciting when it comes to financial planning
We live in the information age. There is no shortage of data, in fact, we have access to more information than we can process. When you spend as much time as we do taking in information on global investment markets and the economy, it becomes important to select the most reputable and appropriate sources of information. We develop a good radar for what is credible and what is sensationalist. Our academic training also reminds us to always check sources when a statement is made, and think this is good advice for everyone, no matter the subject. It is easy to get a distilled version or interpretation on social media or a news site, but it might not be complete or accurate or may have another agenda.
There has been a lot of commentary this week on the monthly update from the International Monetary Fund (IMF) on their World Economic Outlook. If you want to read this in full and go to the source, you can read their full outlook here.
In short, despite many of the comments and assessments, the summary for us is that it is more of the same. The difference in their projections from the prior month is 0.1%: that is a projected global growth in 2023 of 2.8%. While pessimists will focus on the fact that they have reduced their outlook projections, optimists will point out that they are still projecting growth, and not a contraction, thereby avoiding global recession.
The report has a lot of detailed analysis and useful data. It must be remembered though, that these are projections, not actual figures, and they are subject to change, depending on what happens in the world in the coming months.
Focus on your investment timeline
When you are digesting information such as this, we advise you to remember your timeline. It is important to be agile and make appropriate adjustments according to what is happening in the world to an extent, but you need to get the balance right. When we advise our clients, we tactically adjust for these global projections where relevant, but if a client’s objective has a 20 year time frame for example, it might not be relevant, or even beneficial to change with each month or quarterly release of economic data, outlooks and projections. Staying the course can minimise transaction costs and keep you in the market and focused on longer term returns.
The crux of our message here is to
a) focus on the timeframe of your goals, and
b) avoid exaggerated commentary.
This is also really important when you are looking at other sources of information and notably self-help personal finance books.
First, if they are good, they will be a bit boring. Boring is good when it comes to managing your money and building your wealth. It is based on core principles that preserve and build your wealth.
Second, there are no short-cuts, quick wins or strategies you can learn in a book, that are not known to the market.
Where these books can be helpful, is to reinforce good practices such as budgeting, managing debt by interest rate, applying your cash flow surplus, aligning your investments to your goals, being disciplined in your investment approach, and helping you to understand what is actually most important to you.
But, they do not provide advice that is specific to your situation.
If you are reading a self help finance book, take the boring test. If it is a bit dull, it is probably offering sound guidance towards fundamental principles. If it is exciting or sensational, or encouraging you to adopt a course of action that is ‘secret’ or ‘that the professionals don’t want you to know’ be sceptical. There are no secrets or quick wins.
Finally, remember the important adage, if it seems too good to be true, it probably is.
For good financial advice that is specific to you as an expat in Europe, speak with us at Extended Investments Limited.
