Lessons from the Economic Crash: A Financial Broker Perspective

19th June 2020

Think back to the start of 2008. The economic storm clouds were getting darker, there were rumblings about losses building in banks across the globe and investors were beginning to get nervous. And now race forwards 7 years and consider the lessons to be learned with the benefit of hindsight. Like all lessons, these are lessons that can easily be forgotten again!

We are our own worst enemies
Research has shown time and time again that “stock picking” investors rarely out-perform the market. Yes some hit lucky and beat the market, but the majority would be better off in a fund that tracks a stock market index, or a professionally managed active fund.

Why is that? At the end of the day, people make poor investment decisions because they are human. They see stock markets racing ahead, and then decide to buy in. Or indeed (as during the economic crash) when there are huge falls in the market, investors decide to jump ship. And of course this is exactly the opposite of what we should do, i.e. buy low and sell high.

Your financial adviser will help you to do the right thing, and often that might be to sit tight and do nothing at all. 

There’s no such thing as a sure thing
Every Financial Broker will know the horror stories of one-way bets and sure things. Surely, if you had a genuine one-way bet, you’d tell no one about it! So the “guaranteed” returns that were coming from apartments in far-flung places and the certain returns from Irish bank shares were shown up for what they are – investments with risks attached, just like all other investments.

Your Financial Broker will ensure you have a diversified investment portfolio that matches your risk tolerance. They will caution you against these “sure things”!

Independent financial advice is key
In the past, when people were asked about the amount of risk they were happy to take, they bullishly took on more risk, with the hope of gaining greater rewards. However the folly of this approach was laid bare when the crash came and investment losses increased. Many investors realised that they were ill equipped to deal with these losses, either financially or emotionally.

Having a Financial Broker in your corner will help take the emotion out of your investments. Their financial advice will be based on experience and knowledge of the highs and lows of the markets over many investment cycles. Their only interest is in your financial goals and objectives and how best to achieve them. From their experiences as a financial adviser, they have learned that there is no quick route to success.

Instead they will bring rigour and a structured methodology to the financial advice that they offer. So apart from fulfilling their traditional role as your financial adviser, a Financial Broker can be your financial conscience!