Bruce Brammall: Hold or fold amid a crumbling market? You’re not asking yourself the right question

The thud a market makes when it violently crashes can cause tremors through to your bones. No, it’s not your arthritis. Some of the worst days in years, with volatility shooting back up to the pandemic highs of March 2020, helped kick off the month. Headlines squealed of panicked markets dropping hundreds of billions. Noise so loud it’s like you’re standing next to a jet engine firing up. Here in downtown Shanghai, where I landed ahead of last Monday’s bigger crash, life rolled on. Were it not for headlines bleating through my phone from home, I mightn’t have noticed. Well, until I turned on the TV to be greeted by the disaster unfolding on CNN. Shanghai, as a city, is a sight to behold. So are the obvious signs of the wealth of the people here, backed by impressive public infrastructure. But Shanghai’s main index has been falling for a few months now. It’s down 10 per cent from its recent peak in May. But it’s still down more than 50 per cent from highs in October 2007, before the global financial crisis. In perspective Perspective. Markets doing their thing is noise. Sometimes, yes, it gets loud. Markets rattle. They always will. It it foreseeable? Should you have done something ahead of time? Cashed out last month? Been ready to pile back in? There’s speculation the world’s most famous investor, Warren Buffett, has been stashing cash to be ready for a crash. His Berkshire Hathaway is holding eye-watering amounts of liquidity — $US277 billion ($423b) — after big selldowns, including half his monster holding in Apple, in recent quarters. Is he holding cash to pounce? Possibly. But Buffett is not a short-term gains kind of guy. When he buys, he tends to hold things for very, very long periods of time. Trust the process And that’s one of the types of messages you should take from Buffett. (There are loads of others.) Very few make their fortunes from getting big bets right on “timing” markets — buying low and selling high. Some do. But plenty lose wads in the same way. The process for building wealth doesn’t have to involve making big bets on timing markets. A better process involves committing to, and trusting, a process — one that Buffett himself recommends to create wealth for most people. Get started. Invest. Take appropriate risk. Add to it regularly. Make investing a monthly habit. And trust markets will do their thing. The process to growing wealth is buying quality assets and holding them. Potentially forever. Beating yourself The hardest thing about timing markets for punters? Beating yourself in one of the toughest of all mind games. When’s the best time to buy? When markets have crashed. But do you know how hard it is to do that? Could they fall further? Why are there so many experts and analysts talking doom and gloom? And when is the best time to sell? When markets have been screaming northward for an extended period, and everyone thinks “this is easy”. But it can be equally tough trying to sell a good thing. The good times could continue and you’ll miss out. Plus you’ll have tax to pay. Both bottoms and tops are only known in hindsight. And those biases — to stay out and to stay in — are incredibly tough mindsets to beat. Manual to automatic Sure, some take an active interest in their superannuation. Most don’t. At best, most will pick an investment option and let it run. What happens? Your employer continues to regularly pump money into your super. It keeps going in, whether markets are going up, down, or sideways. And (making sure you keep an eye on fees), over the long term, your super will largely achieve what markets get. Most people would be ahead if they simply replicated their super. Get a start, with whatever amount, add to it, every month, no matter what markets were doing. Last month, you might have overpaid a bit. This month, you’re buying the same assets, at a discount. There are plenty of inexpensive options to get started on investing, particularly via an index-fund manager. Make sure you do some reading on asset classes and understand the general risk profile of the investment you’re considering. But . . . get on with it. Fight the inertia not to. You’ll be proud of yourself down the track. And if you can’t do it on your Pat Malone, get a financial adviser to help. Bruce Brammall is the author of Mortgages Made Easy and is both a financial adviser and mortgage broker. bruce@brucebrammallfinancial.com.au

Bruce Brammall: Hold or fold amid a crumbling market? You’re not asking yourself the right question

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