Often when I tell people I’m a financial adviser they ask me ‘what do you think the share market will do this year’ or ‘what do you think about NAB shares’ or something similar.
When I say that I have no idea they either think I’m holding out by not letting them know the ‘good oil’ or that I’m a terrible financial adviser.
The real reason is that these questions are more suited to the mind of a stockbroker rather than a financial adviserIt might be tough for them to hear but the reality is that typically trying to guess what will happen over the short term, or what the performance of an individual company will be, is next to impossible. The question of whether some stockbrokers can outperform the average of the share market has been debated at length. But the truth is it makes very little difference either way.In reality, the answers to these short-term questions aren’t going to determine whether you can retire comfortably or not. What does, and what defines us as financial advisers, revolves around three things:
- Establish a rational long-term plan.
- Craft a portfolio and strategy to fund that plan.
- Coach our clients to not blow up the plan, the portfolio, or themselves.
In most cases, trying to guess what’s going to happen in the short term is just a distraction from the important questions. For example, are you using your income in the best possible way? Are you invested in the most suitable overall asset allocation? Have you done everything you can to minimise tax?Once these questions are answered you will find that trying to squeeze an additional return out of your portfolio by timing the market or outperforming the average return may or may not be possible.Either way it’s probably not that important.Written by Dallas Davison.
