| In nature, weather is one of the volatile elements that ecosystems, concrete jungles and ordinary humans all must deal with daily. One of the reasons that humans have survived to become the dominant species over millennia is their ability to adapt the environment to suit themselves. They grow their food and don’t have to forage for it, they store their water, they build their own habitats and don’t have to wear themselves out travelling from place to place. Humans have had less success controlling the weather – they can just mitigate the impact. THE PODCAST ON THIS POST (WHERE I AM JOINED BY LIAM WRIGHT) IS AVAILABLE HERE  Economic storms are very similar – we have very little control over that variable, but we can mitigate our response to it. The first week of August 2024 was a good case study of a human response to a shock stemming from a changing economic environment (The Japanese carry-trade flash crash and rebound). As soon as it became evident that the un-winding of carry trades was impacting the stock market, doomsayers and chicken-littles came crawling out of the woodwork. Every time there is a natural disaster – floods, droughts, fires, hurricanes- all the climate change pundits get their click-bait high. Let me just make one thing clear – I am not a climate change denier. Climates go through their own super-cycles and have done for millennia – the one difference now is that thanks to 8 billion humans polluting the environment, mostly with rampant consumerism, pollution is affecting the environment. Carbon is often cited as the major problem – which is confusing to anyone with even a basic understanding of biology. Although Carbon dioxide is the primary input ingredient in photosynthesis in plants (including seaweed and single cell marine algae) plants just can’t grow quickly enough (especially in the areas where the carbon is produced) to mop up that CO2, and although the amount of CO2 in the air is not relevant to animal respiration, when it dissolves in the ocean it has much more dire consequences because it increases the acidity (What is Ocean Acidification? (noaa.gov)) In the last 200 years that increase in acidity of the ocean has been 30%. The Ocean is an even more fragile ecosystem than land, and marine life just cannot adapt to this change quickly enough leading to coral death, exoskeleton damage among many other issues. (Sorry for the digression…)  |
| Lies race around the world before the truth even has time to get out of bed…. Doomsayers get an emotional kick out of hopping on a disaster bandwagon and getting all the clicks and views. They are surprisingly quiet when everything has gone back to normal. Even a stopped clock is right twice a day. Eventually the doomsayers will be right – and then you won’t hear the end of it. Some doomsayers have a more insidious objective – they have a product or service that will ‘solve’ your problems. So, understanding that the economy is cyclical – what can you do to mitigate that gut churning fear that drives you to dump stock or into the arms of the doomsayers products? You need to have a plan. Of course you can get the help of a financial planner, but you can also do it yourself. As an experiment I asked Co-pilot (free AI) to assist in doing a plan for myself, and it gave a decent recommendation on where to start – but it is obviously going to need way more research than that. Step one – and only you can do this – is to collect all your data, and even better simplify it into a simple income statement (aka budget) and balance sheet (assets and liabilities). Being financially organized is probably the best gift you can give your future self. (I have a free filing system I use for all my clients (my RedFile) that you’re welcome to email me for (dawn@rexsolom.co.za)).  Step two is to put clear objectives in place for your investments (for example, emergency fund, legacy, retirement, bucket list, university fund etc). Each objective will have a different mix of assets required to meet the said objective. Each objective should have a target value. The most relevant objective when it comes to mitigating volatility in the markets is ensuring that your capital allocation reflects your objectives. Let’s take university for example. You know what the Present value is, but say it is only 2 years away. You don’t want some sudden market volatility to halve the value – so you need to structure less volatility in your investment – so you can choose income assets, for example. If university is 20 years away, you have plenty of time for your investment to weather the storm – and take full advantage of growth assets. The take-away from all of this is that when you have objectives for each of your investment ‘silos’, it leaves you angst free even if the market ‘has a moment’. You can ignore the FOMO and let the doomsayers get their grubby little time in the spotlight. Keep yourself educated. I know not everyone finds the economy and markets as fascinating as I do, and it can be a complicated and bewildering place to navigate. It’s for this reason that I blog extensively and put out a weekly (free) newsletter – so that my clients have been prewarned when there’s something nasty coming down the pike (you can email me to get onto the list).  The question you may be asking yourself though is when do investors need a planner? I have written a detailed post on this (https://rexsolom.co.za/why-do-i-need-a-financial-advisor/) but here are some that come to mind. There are those of us whose financial affairs can be complicated. Think in terms of personal, business and trust assets as an example. For an individual owning all of these, how they interact, deliver tax friendly incomes and ensuring estate friendly treatment is much more complex than setting objectives for your various investment silos. If you then add global assets, it can get even more complicated. Ensuring that the correct range of expertise can be drawn on to solve or advise on a complex matter is what a good planner should be able to do. I have heard clients say that they already have a lawyer and/or accountant that can assist. But the skill is really in delivering and maintaining a total solution that goes beyond the important but narrow focus provided by an accountant or lawyer. As clients get older, their financial complexity also increases. There comes a point during retirement where the financial complexity stays constant, but the client loses either the will or cognitive ability to keep pace with this complexity. This is another place where a skilled compassionate planner has the ability to streamline assets whilst still delivering on the requirements for the assets – even better if the planner could have built a relationship with the client before cognitive decline. You are ultimately planning for asset longevity beyond your own years. Author: Dawn Ridler (C) Articles and Blogs: Pruning your wealth farm NEW Should you change your investments with changing politics? Taking a holistic view of your wealth Why do I need a financial advisor ? Costs Fees and Commissions The NHI and what to do about it New-Normal for Retirement? Locking-In Interest rates – The inflation story Situs – The Myths and Reality Tax Residency – New Rules new headaches Are retirement annuities dead A new look at retirement Offshore investing – an unpopular opinion Cobie Legrange and Dawn Ridler, Rexsolom Invest, Licensed FSP 45521. Email: cobie@rexsolom.co.za, dawn@rexsolom.co.za Website: rexsolom.co.za, wealthecology.co.za |