Page 4 - DIY Investor Magazine | Issue 32

GET RICH SLOW
‘I’m a TWaT’ announced my companion over a spot of lunch recently.
‘You’ll get no argument from me’ I thought, as I watched capillary action drawing French Onion Soup up his tie.
But he explained that, for him, the new normal was Tuesday, Wednesday and Thursday in the office; with the majority of Covid restrictions now an unpleasant memory, for many, things will never be the same again.
Whilst spared the Four Horsemen thus far, the new normal is being cast with a pretty apocalyptic political, economic and environmental backdrop. Russian troops mass on the Ukrainian border whilst closer to home, millions face being plunged into ‘fuel poverty’ as the tax burden hits a seventy year high, and inflation is forecast to hit 7% in the Spring.
The new normal for an increasing number of people is financial self-determination; according to a survey by Boring Money, 950,000 people with an average age of 34, opened DIY investing accounts in the twelve months following the first lockdown.
But its findings came with a wealth warning as a further study by the FCA found ‘overconfident young investors charging into speculative assets they do not understand’; almost four in five said they relied on ‘gut instinct’ to make decisions, with many buying assets based on their emotions and feelings, such as the thrill of trading.
The FCA report found that newer investors were reliant on online tips and social media rather than financial advice and were often lured into making highly speculative investments targeting short-term gains.
Inflation not only fuels the cost-of-living crisis and makes interest rate hikes more likely, it delivers a significant headwind
to investors who currently need to achieve a 5.4% return just to preserve the real value of their money.
Faced with a widening gap between the interest on their savings and the rate of inflation, some will turn to investing for the first time; never has there been a greater requirement for good financial education and information.
For so long the subject of smug water-cooler conversations, the US tech-heavy Nasdaq index suffered its worst start to a year since 2008 as people ditched ‘stay-at-home’ stocks and girded themselves for higher interest rates.
So, will you trust your instinct to choose the ‘right’ cryptocurrency, buy GameStop on the dip after its share price tanked by 60%, or trust your luck that the NFT you purchase is not part of a HMRC tax-fraud investigation?
Or will you trust the experts? In this issue we hear from abrdn, Fidelity and Schroders who are each seeking to extract value from Asian markets as economies recover and structural change takes effect; each manager has boots-on-the-ground experience and direct access to companies that would be very difficult for an individual investor to achieve independently.
This is precisely DIY Investor’s remit – if you believe that opportunities exist in Asia, compare and contrast the philosophy and tactics of individual fund managers and make informed investment decisions.
Elsewhere, Jupiter introduces the technology enablers – companies that supply the ‘picks and shovels’ that win, regardless of which technology prevails.
There may be inflation-beating returns to be found in private markets, and Kepler Trust Intelligence identifies a number of trusts that offer access to retail investors they would be denied individually; HANetf showcases its cleaner living-themed ETF.
The behaviour identified by the FCA is complete anathema
to the ‘get rich slow’ philosophy propounded by DIY investor; those seeking to avoid short term noise and market volatility may like IT Investor’s look back at the performance of the UK’s oldest investment trusts.
It shows Scottish Mortgage, one of the recent big fallers, returned 24.6% p.a. over the past 10 years and 14.7% annualised over the last 30 years; the art of doing nothing.
DIY Investor Magazine · Feb 2022 4