5 Uncomfortable Threats In 2019

There is quite a list of macro risks in 2019, all of which have been well aired in the media in recent weeks. But ultimately the greatest investment risk for you in 2019 is you. In particular I want to highlight problems I have already observed in recent weeks.

 

There are always periods of respite in downtrends. There can be quite furious bounces, fuelled by panic buying. This is textbook, and it is what has happened in the last week or so. As expected, I have encountered clients wanting to buy, not wanting to miss the boat. That is perfectly understandable behaviourally – we are programmed to be optimistic. But the odds are that it is an unhelpful instinct right now. (See market update).

 

Similar to the latter, many investors are still complacent about the risks. If that wasn’t the case the bounce of the last few days would not have been led by smaller companies and a recovery in poor quality bonds. The downtrend will more obviously be over when there are no more “buy the dip” and “don’t panic” headlines.

 

A significant number of investors are still sitting on the same jumble of incoherent investments which they have held for years. When they do engage with their portfolio they will rationalise “the market always recovers” etc. Perhaps (though see The Japan Problem). At least apply The Overnight Test and look to tidy up – it’s a start.

 

The converse is that you are mostly in cash right now, and perhaps there is some unacknowledged fear. This is all the more likely if you are a bit older than younger – and I can certainly sympathise with this one. The risk is that you stay in cash and miss the new uptrend whenever that might unfold. It is important to understand when you will consider re-investing, how, and into what.

 

Or over-estimating your skills and insights. Over-confidence can be a curse, and one good investment call tends to make this worse, creating a sense of invincibility. I discussed this at a personal level in teleconferences of recent months. For example, as discussed in the most recent teleconference, I am drip-feeding 30% of my cash back into the market to acknowledge the risk of my being wrong with the current analysis – a similar strategy can help those who might be inclined to be too fearful.

 

This list could be much longer. For those prepared to be a bit introspective, do go back and look at 19 Bad Habits and Curiosity Killed Your Investment.