We are our own worst enemies. Stop competing with the markets! - Efficient Private Clients
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We are our own worst enemies. Stop competing with the markets!

We are our own worst enemies. Stop competing with the markets! - By Renier van Zyl

 “Investing isn’t about beating others at their game, it’s about controlling yourself at your own game” – Benjamin Graham, “The Intelligent Investor”.

Is investing for you like going to war? Or struggling for survival in the wilderness? This misconception about investing often leads investor to prioritise beating the market in an effort to ‘win’ instead of adhering to their own goals and strategies. Consequently, we become our own worst enemy by listening to Mr Market. Mr. Market says “Buy!” when the markets are high and then shouts “Sell!” when there is a low.

During 1999, when Americans directed an average of 8.6% into their retirement plans, shows this clearly. By 2002, after Mr. Market had spent 3 years stuffing stocks into black garbage bags, the average contribution dropped by a staggering 23% to 7%. Instead of staying disciplined and capitalising, investors steadily pulled back because of Mr. Market’s instruction of selling.

More important than trying to time Mr. Market is a disciplined investment strategy. This boils down to speculating vs. investing. Time and time again investors speculate when they think they are investing. Impatience and the desire for a quick buck are the two main drivers behind speculative behaviour. Consider a scenario where two destinations are 240 kilometres apart: adhering to the 120 km/h speed limit ensures a safe arrival in two hours, while doubling the speed to 240 km/h might halve the time but significantly elevates the risk of dying. Although driving fast might work for one lucky person, it may not for another; chasing high returns in a short period, could result in disaster for those who attempt to replicate it.

Adopting a disciplined investment approach, you need to distinguish between volatility and risk, because they are not synonymous. Howard Marks, in his book "Mastering the Market Cycle," defines risk as the "permanent loss of capital" and any "losses incurred due to opportunity cost." Mere market fluctuations should not deter you from investing. Market fluctuations typically correct themselves over time and do not perceive every market downturn as either the precursor to a crash or an irreversible event. Instead, stay the course and stick to your investment strategy.

So what do you need to consider when crafting your disciplined investment strategy? Consider two key players:
• Retail investing: Often for the DIY enthusiasts, and
• Institutional investing: For the seasoned pros.

Retail investing is for you if you are often sceptical of the financial industry, preferring a more hands-on management strategy. If this is you, consider starting off by partnering with a financial professional who can help you steer clear of self-destructive behaviour like market timing and a short-term mindset. If you are set on managing your own investments, a smart tactic is dollar-cost averaging, regularly investing in an index (e.g., monthly, annually, or on significant dates) regardless of market fluctuations. Critical: maintain your strategy over the long term.

For many individuals, financial goals add complexity that a simple index strategy cannot fully address. This is where institutional investors, like us, and financial planners step in. We operate with structured investment frameworks and disciplined strategies to assist you in achieving your financial goals. Whether those goals are income generation or capital growth, we support you by ensuring that you remain invested through market fluctuations. Ultimately, we choose a strategy that aligns with your objectives, determined through collaboration with your advisor.

Move away from the competitive narrative often associated with investing and rather work on not being your own worst enemy. Achieving your goals and being financial well is possible with the right financial partner!