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Information You won’t get from Unlicensed Accountants #86

Along with a raft of legislative change, the Australian Securities and Investments Commission (ASIC) has also introduced new licensing requirements for accountants who work with and advise Self Managed Superannuation Fund (SMSF) Trustees. Only approx. 10% of accountants have complied with these changes to date.

As such if you, as many, consider your accountant would be your 1st port of call for Financial Advice, they will likely advise you, they are unable to provide the information you require & should consult a qualified Financial Adviser / Planner.

This is general advice only and you should seek expert financial advice from a qualified financial adviser before acting on any of the information covered in these topics.

Five key irrational investment concepts that can prevent long term investment success

The majority of Investors need a robust Financial Plan, and then assistance in making rational decisions to stick to their financial plan as emotional investment decisions can adversely impact long term performance.

These are five of the main investment bias that have emanated from the studies of behavioural finance which can result in poor investment performance for investors:

  1. Endowment Bias – Investors will hold on to poor investments for extended periods, because it it too painful for them to admit they made a poor investment decision. This is one of the first lessons of economics – that of opportunity cost.
  2. Anchoring Bias – Investors anchor their investment decision to trivial or irrelevant information to support an investment decision they have made, while ignoring more crucial information.
  3. Attention Bias – Investors will often invest in companies that they have heard of, or have been impressed by a catchy advertising campaign, even if the economic fundamentals are poor.
  4. Herd Bias – Many investors follow the herd with their investment decisions. Property investors are particularly susceptible to this, and it also cost investors plenty during Dot Com investment boom of 2000.
  5. Home Bias – Many investors will pass up mouth watering global investment opportunities, when they don’t seek expert advice. For example they will restrict their investments to stocks that list exclusively on the Australian Stock Exchange. Australia makes up less than 2% of global stock markets.

“An education isn’t how much you’ve committed to memory, or even how much you know. It is being able to differentiate between what you know, and what you don’t know.” – Anatole France.

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