Your Money, Your Investment

LGBTQ+ Financial Advice by Karam Singh

In an all-too-familiar situation, we are witnessing an increase in our housing costs, utilities, food, transport, and other expenditures. The economic numbers, while still appearing stable, are being closely monitored for any signs of impending economic stress.

There has been considerable confusion surrounding the peak of the rate-hike cycle and when it will end. The full impact of the rate hike cycle on unemployment has yet to be seen. Household savings buffers are depleting with each rate hike as the cost-of-living crisis affects most households.

If anything, the past three years have taught us that accurate predictions are elusive. I still remember the outset of COVID-19 and the associated market meltdown when many forecasters rightly anticipated a steep drop in asset prices, including in Australia. However, the market defied most predictions and reached record highs soon after. 

In my role as an adviser, we observe what most decision-makers, including central bankers, do not. We witness the real end-consumer and can discern why some methodologies and predictions have failed to materialise.

What we see is the consumer—their mindset, behavioural finance psychology, outlook, their sources of optimism, and their fears. In this privileged position, we can offer them guidance on improving their financial well-being, not only in terms of asset and cashflow management but also in managing their emotions regarding money.

After an extended lockdown due to COVID-19, a series of natural disasters (such as the catastrophic bushfires and floods in Australia), conflicts (like Russia/Ukraine), potential unease in the South China Sea, changes in global leadership (including the US, Germany, UK, Australia, among others), and the rise of big tech, one certainty is that human behavioural economic psychology has shifted, and this shift may be permanent.

Many of the investors we speak to are understandably concerned about the long-term outlook, which has led them to change their perceptions and decisions regarding finance and investments. For example, we still see consumers spending on discretionary items like overseas holidays and dining out, despite inflationary pressure, because they believe that circumstances are fluid and will eventually recover. After all, we have lived through events like the Global Financial Crisis, the Euro debt crisis (2012), and the Asian financial crisis (1997) and have witnessed global recovery each time.

Many investors get caught up in the noise, and this often determines their mid to long-term outcomes. In any investment, the key is to ensure that you understand what you are investing in, have confidence in the quality of the company or strategy, and understand that it will ultimately revert to its mean.

Numerous studies have compared investors who sold their assets during the GFC versus those who held onto them, and similarly, those who sold during the COVID sell-off versus those who retained their assets. The key is to hold onto top-quality investments, as these are the assets that generally withstand a downturn. Economic uncertainty has a unique ability to sift through the system and weed out low-quality holdings, which typically struggle to retain their value during and after a crisis.

Equally, in times like these, it is essential to sit down and analyse the costs and benefits of your assets and liabilities, as well as your income and expenses. What are you paying for, and what benefits are you receiving? Are you achieving a total return that surpasses costs and inflation? How can you optimize your asset portfolio or initiate asset-building in a challenging economic backdrop?

To gain a clearer understanding and crystallize your goals, objectives, and options, consider consulting a licensed adviser.

This information is general advice only and does not take into account your personal circumstances, goals and objectives. Therefore, you should consider its appropriateness for your circumstances before acting on this information.

Karam Singh can be reached at [email protected]