Page 2 - E + R = O - A Formula for Success ad-hoc newsletter (with FWP footer)

In a panicked response, potentially fuelled by gloomy investors resist the siren calls of new investment fads or,
media speculation of the resulting uncertainty, an worse, outright scams.
investor sells some, or all, of their investment The Guiding Hand of a Trusted Adviser
(response).
Without education and training - sometimes gained from
Lacking a long-term perspective and reacting to the bitter experience - it is hard for non-investment
short-term news, our investor misses out on the professionals to develop a cogent investment
subsequent market recovery and suffers anxiety about philosophy. And, as we have observed, even the most
when, or if, to get back in, leading to suboptimal self-aware find it hard to manage their own responses to
investment returns (outcome).
events. This is precisely why a financial adviser can be
To see the same hypothetical example from a different so valuable - by providing the foundation of an
perspective, a surprise event causes markets to fall investment philosophy and acting as an experienced
suddenly (E). Based on his or her understanding of the counsellor when responding to events.
long-term nature of returns and the short-term nature of We know that investing will always be both alluring and,
volatility spikes around news events, an investor is able at times, scary, but a view of how to approach investing
to control his or her emotions (R) and maintain combined with the guidance of a professional adviser
investment discipline, leading to a higher chance of a can help people stay the course through challenging
successful long-term outcome (O).
times. Advisers can provide an objective view and help
This example reveals why having an investment investors separate emotions from investment
philosophy is so important. By understanding how decisions. Moreover, great advisers can educate,
markets work and maintaining a long-term perspective communicate, set realistic financial goals and help their
on past events, investors can focus on ensuring that clients deal with their responses even to the most
their responses to events are consistent with their long- extreme market events.
term plan.
In the spirit of the E + R = O formula, good advice, driven
The Foundation of an Enduring Philosophy by a sound philosophy, can help increase the probability
of having a successful financial outcome.
An enduring investment philosophy is built on solid
principles backed by decades of empirical academic Footnotes
evidence. Examples of such principles might be: trusting 1. 1. Jack Canfield, The Success Principles: How to Get from
that prices are set to provide a fair expected return; Where You Are to Where You Want to Be (New York:
recognising the difference between investing and HarperCollins Publishers, 2004)
speculating; relying on the power of diversification to
manage risk and increase the reliability of outcomes;
and benchmarking your progress against your own In this article we have not taken into account any
realistic long-term investment goals. particular person’s objectives, financial situation or
needs. You should, before acting on this information,
Combined, these principles might help us react better to consider the appropriateness of this information
market events, even when those events are globally having regard to your personal objectives, financial
significant or when, as some might suggest, a paradigm situation or needs. We recommend you obtain
financial advice specific to your situation before
shift has occurred, leading to claims that “it’s different making any financial investment or insurance
this time.” Adhering to these principles can also help decision.

P (08) 9207 3844
W www.fwplanners.com.au
E clientservices@fwplanners.com.au
Level 1, 176 Main Street,
Osborne Park WA 6017

Future Wealth Planners Pty Ltd is a Corporate Authorised Representative (325961) of Sentry Advice Pty Ltd (AFSL 227748, ABN: 77103642888)