Safely Reaching Your Goals

Fexserv’s philosphy for those who want to know all the details:

  1. We only offer products in which we ourselves are substantially invested. This means they are products we have tried and tested, or products tailor-made for us and our friends and clients.

  2. We start with your life and your personal situation: You may not think about it this way, but you have many ‘assets’ from which to derive joy, happiness, and fulfilment: friends, family, education, your hobby, your job, your house, your money, and your investments; All of them are important to you, and all of them want your attention. You can invest in some of them (hoping to get something back), and neglect others. When we think about your investments, it’s about how you can achieve your other, bigger goals.

  3. How do you balance your life? You have limited resources. Time spent on one thing is time not spent on another. Time invested in your band is time not invested in your family. Money spent is money not saved. Money in the bank is money not invested. We all need a coach from time to time to tell us what we already know: that we need to balance our lives.

  4. Life’s too short to miss chances: What’s in the past, stays in the past. Flunking at school takes a lot of extra work later to catch up on. Missing a stock-market rally is equally a missed opportunity. How many times did you think of selling something at the top and it turned out you didn’t do it? Watch the time you spend with your parents as they get old, with your kids while they are still young, and your partner while you are active enough to create memories that last you a lifetime. Have someone else watch your investments for you (and give you a shout when they really need your attention), instead of watching them every day. Life is too short.

  5. What does that have to do with Investing? Regardless of whether we neglect our investments or pay a lot of attention to them, most people are likely to do the wrong thing in either case! The hyper-active ones will over-trade, incur lots of costs, and create little value along the way, and the passive ones who invest faithfully through thick and thin find in hindsight that they have made or lost most of their money in a few, very short periods when the market was really turbulent for a short while. Others miss out on strong possible returns in the ‘steady’ phases of the market, because they limit their exposure to such an extent that the calmer times do absolutely nothing for them. That too is not optimal.

  6. Everywhere else in life we seem to know what to do: When you find something interesting, rewarding, or exhilarating, and it’s not very risky (say a cheap tropical holiday, or a free trial of a new experience), you go for it, right? When you find something interesting, rewarding, or exhilarating but it’s risky, you may just tip your toe in the water to (a) survive but (b) not miss out completely. Why then don’t we use the same common sense when it comes to investing? Our common sense would be a good guide, but greed, fear and other behavioural biases work against us. They make you react to what’s already happened, not what’s ahead. We are programmed by nature to work and think this way. Greed and fear work well in the wild: We feast when there is an easy meal, but we are cautious when seeing a bear or a wolf. Running away is certainly not always the best strategy! It’s the same with markets: If one of your investments lost 5% yesterday, it may be time to cut, but not completely. Just reduce your risk. Not being invested at all is one of the biggest risks you can take, even in turbulent times, because you risk getting relatively poorer if everyone who stays invested does well. Know your risks, but don’t run for the hills either.

  7. We get through life, mostly, not by seeking rewards, but by managing the risks associated with the rewards we seek: Most racing fans don’t bet everything on becoming the next Formula 1 champion. Not to die trying is the key criterion. The way to practice for a marathon is by slowly building up strength. Don’t push it. And know your bad days, which make you prone to injury. It may take you longer to get there, but you’ll get there with much more certainty. It’s like this with most things: relationships, learning, and money: (i) regular exposure matters (we work on it a little every day, not trying to do everything in one week), (ii) those who try to do it all in a day or two a year take a lot more risk: they may get lucky, but more likely they get hurt and give up. They may or may not achieve their goals in the short run, but never in the long run.

  8. Holistic risk and exposure management gives you the right exposure for the right seasons, the ‘seasons’ in your own life, and the ‘seasons’ in the markets. So you can sleep well, knowing that your investments work for you, in the long run, in a steady fashion. You know the risks you are willing to accept in the search for returns, and you know that the lion didn’t kill you because you didn’t stroke him, AND because you dint run away screaming.