How decision making can impact your finances
Decision making, and the result of decisions you make, can be minor to the point of trivial or can have profound impacts on your finances and your life.
As we saw this week in international football, the decision by a referee to overturn a decision to award a goal to Scotland in their match against Spain had an impact that may have changed the game outcome, and certainly upset a lot of Scottish fans, but it could also have farther reaching ramifications. In this example, we may say that after all, it is just a game, but a national team winning or losing an important match can impact tourist inflows, sponsorships and even infrastructure expenditure. It can have a large economic impact.
Another example of decision making in the news is the US Congress voting to oust the House speaker. At the time of writing, they have not been able to come to an agreement, to reach a collective decision, to appoint a new house speaker. This can have far-reaching impacts on the US government, and on the US and therefore, the global economies.
And so it goes with the decisions we make about our finances and our lives. At Black Swan Capital, we follow a process of objectives-based financial planning when advising clients and this should be the foundation for decisions you make on your financial lives.
Objectives-based financial planning means that you take the time to consider and quantify what is most important to you, and what goals you aspire towards. This can be anything that is important to you: saving a deposit for a house in a few years, buying a yacht and sailing around the world, or it may be to retire by a certain age, in a particular country, and with a desired quality of life.
Whatever your goal, it is this target that should shape your decisions initially when you choose how to invest, and ongoing, when you assess how your investments are performing.
When you are commencing an investment in whatever form, the decisions around where and how to invest should be answered by your goals: what are you expecting to achieve and by when. We often describe this as the optimal path to get you from where you are to where you want to be.
Our goals and priorities can change over time, and as they do, that is a good catalyst to review your assets, all your investments.
When you review your investments over time, whether on your own or with a financial planner like Black Swan Capital, the main question to ask is whether this investment is still aligned to your objectives and whether it is on track to help you reach those goals. By focusing on the target, you can remove a lot of the noise that can distract and lead to poorer decision making. Short term market movements can influence someone to buy or sell an asset, but it is longer term trends that are more impactful. A reactive buy or sell can sometimes lead to poorer results and the news on which it is based can be out of date by the time it is acted upon.
The value of a financial planner, the real value add is to provide clarity and objectivity alongside expertise. We can help you to understand your goals, to quantify them and to create an appropriate plan. A financial planner cannot deliver unrealistic returns. It is good advice to be aware of anyone that is promising to beat the markets. No one can do that. What a good adviser can do is make recommendations for a plan that includes investments that are relevant for you and your targets, and importantly, manage this over time as markets move through cycles, global economic conditions change and your situation evolves. A clear focus on the end target with the expertise of someone like the Black Swan Capital team can keep you on track and help to make good decisions.
In all aspects of life good decision making process can lead to better outcomes. If you would like us to help you set out a plan for your goals, or to review your investments, please contact us at info@blackswancapital.eu or visit our website www.blackswancapital.eu.
