Jeremy Tauri: Going against the grain hard

Know your KiwiSaver plan - and stick with it.

There's one piece of investment advice that will do wonders for your returns but is really hard to follow: It's to go against the crowd.

Buy when everyone else is reticent, hold on to investments through periods of shakiness and sell when everyone else is becoming very excited. It makes sense when you consider it objectively. Why would you want to pay over the odds for an investment that everyone else is clamouring to get into?

But when you try to put it into practice, it can be harder than you expect. Looking for bargains in a depressed market might not be too difficult but it takes steely determination to hold on to them when prices fall further.

Data shows that individual investors do more poorly than the indexes they are invested in partly because they time their purchases and sales badly. They sell at low points of the market and buy back in once some of the gains have already been made.

If you cave and bail out during a rough patch you solidify any losses that until that point have been only on paper. If you can stick it out and ride it back to the good times, you will end up much better off.

Decide independently what you think an appropriate return from your investments is, and what you would be willing to sell for.

This is pertinent now because, although the economy and investment markets in general have been going through a very strong period, there may be volatility on the horizon.
Fortunes may be changing for the property market.

If you check your KiwiSaver balance one day and see it has fallen a bit, do not get scared and switch to a less risky fund to protect the rest of your balance.

Instead, look at the volatility as an opportunity for your investment to pick up more units, which will then shoot off in value again once the volatile period passes. Knowing your plan and sticking to it is the best thing you can do for your investing outcomes.

Jeremy Tauri is an associate at Plus Chartered Accountants