Experts say Australians are at risk of losing their investments as rising inflation causes economic turbulence.
Treasurer Jim Chalmers has been warning of “worsening” conditions in the global economy for months, predicting that the pressure will only increase.
An uncertain market amid high inflation levels and low wage growth plays on the psychology of everyday investors and can lead to poor financial choices, according to Tim Wallace, general manager of investment platform Syfe.
“The mistakes we make are based on emotional responses, we sell out at peak anxiety, we buy with FOMO, and this is really dangerous, especially when markets are volatile,” he said.
“Another mistake is that people make decisions based on a lack of knowledge or time spent researching or bad information or advice.
“And the net result, unfortunately, is that people are worse off in the long run from a wealth perspective.”
According to Merit Wealth president Darren Howard, buying based on emotion rather than reason leaves many investors in trouble.
“It’s many of their behavioral traits that cost them money, one of the most common [behavioural traits] is that they buy high and sell low,” Mr Howard said.
Mr. Howard says many investors who don’t rely on financial advice will look at how a stock or asset class has performed over the past year and use that as an indicator of how it will perform in the future.
“An investor who hasn’t had the chance to get expert advice or professional advice could have bought at the end of a year and put all their money into one investment and then seen their money drop by 15 or 20 percent,” he said.
“Then they’ll say, ‘I can’t take this anymore’ and pull it all out.”
Mr Wallace says his company Syfe has been working to help Australians who may be struggling to understand where to put their money.
Developed by a former Goldman Sach investor, the new “Smart Baskets” allow investors to purchase several pre-selected exchange-traded funds and stocks (ETFs) at once.
Mr. Wallace describes his product as a “secret weapon”, with the pre-chosen financial items developed over a thousand hours of research, including top performing brands such as Vanguard, iShares and Amcor.
“There is a tremendous amount of complexity and noise in the markets and Syfe is a platform specifically designed to cut through that complexity and noise in the SmartBaskets,” he said.
“You get this expertise in your pocket. This is less time people spend researching and more time they can choose for themselves the investment that works for them.”
Mr Howard described it as a “variation” of the existing ETF products on the market, describing the available options as “quality providers”.
He said that Australians doing their own research might find their way to the ETF products offered within Syfe, such as Vanguard and Amcor, and that this could be good for someone who doesn’t want to spend too much time investing.
He said that since the product has no fees other than brokerage, which is $2.50 for Australian purchases, it is “pretty good value”.
However, he stressed that those who want to get the most out of their money should take sound financial advice, saying those thinking about it should do it “sooner rather than later”.
“It can be daunting to get full advice, but I’d recommend going for it once you’ve gotten a bit of a foothold in the workforce,” he said.
“If you look at the longer term benefits, people would spend some money in their late 20s to early 30s, some of the strategies they would adopt at that point should cover the cost of some professional advice and will have huge benefits on the job,” he said.
Both men emphasized the importance of sticking to a strategy and warned that stopping investing too early could have disastrous consequences.
“It is fundamental that we first set goals and an investment plan early on so that we can get through times of turbulence and volatility and stay true to the reasons why we started investing in the first place,” said Mr Wallace .