Investing should be boring: fundie

[view original post]

Losses continue on the ASX today with the benchmark S&P/ASX 200 Index (ASX: XJO) sliding a further 69.5 basis points — or 1.04% — at the time of writing.

The dip brings the index’s losses to more than 10.5% this year to date for Australia’s 200 largest companies by market capitalisation.

Yet despite the allure of certain growth stories in recent years (meme stocks included), according to one fund manager, investors should be focused on the long-term — as boring as that may sound.

The beauty of ‘unknown-unknowns’

The harsh reality is that no one can see or predict what big risks there are on the horizon.

It’s a mathematical impossibility to forecast the number of variables that could affect outcomes on the markets, let alone ASX 200 shares.

This is especially the case for black swan events like the COVID-19 pandemic, according to Spatium Capital fund manager Nicholas Quinn. He wrote on Livewire:

At its inception, the unknown-unknown nature of the pandemic was that unpredictable that it was unlikely to be solved using logic or predictive algorithms. If we consider a less destructive situation, logic or predicative algorithms have a great deal of difficulty trying to [make predictions].

However, there is one certainty in the markets, Quinn says. These “unknown-unknowns” mean there will “will always be perpetual worry in the financial markets”.

The one guarantee we are almost prepared to give is that when new unknown-unknowns enter the macro news cycle, you can almost always expect an overreaction.

With that level of “certainty”, he says to focus on certain tenements to calm these worries — and potentially smooth ASX 200 investment returns for the long-term.

“Investing generally should be a boring, time-consuming and not an exciting endeavour,” he says, “which generally should be engaged in over a lengthy time horizon.”

The fund manager also advocates diversification and avoiding “blindly following herds”.

“Last but not least,” Quinn advises, “don’t check your portfolio each day or each hour — short-term variance is all part of the long-term reward.”