Financial Lifetime Strategies Pty Ltd

26/12/2021

Hope you all had as much fun on Christmas Day as Nathan - wish you all the very best for the new year.

09/09/2020

My experience with home schooling has grown but it still has its challenges. I was listening to a psychologist the other day explaining how to deal with emotional regulation of young kids.

He explained how parents often get it wrong when dealing with young kids who have lost control of their emotions by addressing behaviour before understanding the child’s feelings.

His approach made a lot of sense but can be a challenge to follow particularly in situations where time is short or when you are tired, stressed and dealing with your own emotions. A key point was to bring the child’s emotions down with empathy so that their cognitive thinking returns.

I could not help but think of the parallels of this advice with behavioural finance. Money can invoke strong emotions whether that is due to market volatility, an argument between a couple over finances or siblings over an estate. A highly emotional state can lead to the temporary loss of cognitive and rational thought that results in types of behaviour that leads to costly mistakes.

It leads me to conclude that awareness of emotional regulation and the best ways to manage it is just as important in interaction with adults as it is with young kids.

25/08/2020

An investor who seeks to outguess the market through timing decisions and stock picking is like a motorist who is constantly changing lanes in heavy traffic. In each case, the impulsive moves tend to be dangerous, create undue anxiety, and make it less likely that you’ll reach your destination safely. Check out this animation.

In Markets as in Traffic, Impulsive Moves May Not Help You Get Ahead

18/08/2020

Australia is in its deepest recession since the 1930s, Yet, the stock market is only down modestly this year. In the US, where the virus has claimed 160,000 lives and left unemployment above 10%, the market is near record highs. How to make sense of this? Part of it relates to the fact that markets are always looking ahead.

How can investors make sense of the apparent disconnect between stock market performance and economic indicators?

10/08/2020

Australia is deep into its twice-yearly profit-reporting season, with many companies complaining of ‘low visibility’ in giving the market a steer on earnings trends. While the pandemic is admittedly an exceptional circumstance, the truth is investors rarely enjoy clarity about the outlook. Barry Ritholtz explains...

What’s changed is that many of the self-delusions we use to cope have broken down.

08/10/2019

One of the biggest traps that people fall into with investment is to associate high cost, arcane complexity and slick marketing with good outcomes. In fact, long-term winners don’t do anything special. They just keep it simple and make fewer avoidable errors. In this article, Rick Ferri lists the top 10 mistakes he’s seen.

What separates winners from losers in investing is the number of unnecessary mistakes we make. Here are ten mistakes to avoid and reasons not to invest.

24/09/2019

Not every financial plan is the same. That’s because people differ in many ways. We value different things, we have varied priorities and a wide range of goals set across different horizons. How do we understand what we want? This article suggests first posing to yourself a series of questions. Give it a try. It’ll get you thinking.

While there are countless ways to get your finances in order, it all starts with learning what’s important to you and your family: What are your priorities, what are your values? Once you’ve established that, the steps you need to take should become more clear....

28/08/2019

A few years ago, the idea of everyday investors debating the implications of inverted yield curves would have seemed fanciful. But these days, everyone has access to market information in real time via their devices. According to blogger Michael Batnick, that increases the risk of investors mistaking noise for signal.

Everybody knows everything is the new no one knows anything.

15/08/2019

and cause to behave badly leading to and costly mistakes. This sketch by Carl Richards (Behavior Gap) demonstrates the outcome of this bad behaviour well.

Two important behavioural biases to understand are overconfidence and loss aversion. One involves the desire for more risk and / or fear of missing out while the other fears losing money.

People also can often find it difficult to get out of the mindset of allowing the past to guide your investment decisions because it is much easier to extrapolate recent events out into the future than pondering whether things will change.

To avoid costly mistakes and regrets an awareness of these biases and mindsets is key as well as having a plan that you will stick to no matter what emotions you may feel.

06/08/2019

The people who feel best about their financial situation are often those who are fully aware of what their financial situation is. Knowing how much you earn is not enough. You also need a grasp on what you are spending and saving. This article highlights the virtue of clarity about your finances and your goals.

“It’s not just how much you have—it’s what you do with it,” says one researcher who studies money and happiness.

31/07/2019

If we become and drift from our original planned path over time our are likely to turn into unattainable . A lifetime may result as you contemplate just how your future self will explain this complacency to your family, kids and even yourself in the future?

The variables and assumptions upon which a plan is based change overtime. We may also be distracted by something we have heard from our friends or seen in the media. Like the example with the compass we may become complacent or ignorant with just being slightly off track for a year or so but overtime that complacency or ignorance will compound and is likely to result in us becoming so far off track that we end up in an unfavourable destination.

It is therefore worth spending the time and effort to check your plan on a regular basis to ensure that you remain on the right track to arrive at your desired destination.

23/07/2019

Throughout history, whether it be astrologers, soothsayers, palm readers or fortune tellers humans have regularly shown an interest in those who claim to be able to predict their future. Readers of financial papers and magazines often seem to show an interest in the predictions of the modern day equivalent of financial soothsayers. Mathematics taught me the more variables you put into a mathematical model the greater the variance of the output. With all the variables that influence the markets on a daily basis how can anyone justify trying to make an accurate prediction 12 months from now? So why waste time reading all these market forecasts other than just for entertainment? Wouldn't it be better that your valuable time is spent focusing on things that are meaningful to you such as time with the family, friends and the pursuit of hobbies?