Fear and greed leads to the dark side of investing
Fear and greed are the over riding emotions that govern how we invest and the reason ordinary investors need education rather than solely relying on the advice of brokers and advisers, according to a leading Australian investment analyst.
Wealth Within chief analyst Dale Gillham said because fear stems from not wanting to lose money and greed is the desire to make money, in a volatile market these emotions are simply amplified, which is not a good thing when the “investor lacks the knowledge and understanding to manage the investment”.
“Historically, it has been proven that people with the right education are more successful and achieve better returns than those with little or no knowledge. It is wise to gain a solid education when it comes to trading the share market so the investor is prepared to manage their psychology and the investment in any market condition,” he said.
According to Gillham, professional advice is not necessarily a good thing, as it can lull people into a false sense of security.
“In the majority of cases, these professionals are paid a fee or commission to sell a product, which means the educational value provided is limited to towing the company product line.
“Advisers do have a role to play, but I always recommend investors question the advice and under no circumstance should they rely on one person’s opinion. Make sure they have a track record of delivering solid returns over a period of at least four to five years.”
Gillham said regardless of the size of the investment, the process taken to select and manage a portfolio of shares should be the same.
“You should always take the same amount of time researching your options to ensure you are protecting your capital on each and every occasion,” Gillham said.
“Education is extremely important for any type of investor, though I would say it is even more important for the smaller investor as they cannot afford to lose.”
Recommended for you
The new financial year has got off to a strong start in adviser gains, helped by new entrants, after heavy losses sustained in June.
Michael McCorry, chief investment officer at BlackRock Australia, has detailed how investors are reconsidering their 60/40 portfolios as macro uncertainty highlight the benefits of liquid alternatives.
Having reset its market focus to high-net-worth advisers, Praemium’s administration solution has been selected by Bell Potter in a deal that increases the platform's funds under administration by $6 billion.
High transition rates from financial advisers have helped Netwealth’s funds under administration rise by $3.7 billion in the fourth quarter of FY25.
