The Simple Answers To Investing

Is the very thought of planning a barrier for you when it comes to investing? Or are you guilty of overanalysing and underacting? Wanita Isaacs investigates why, in our search for answers, we refuse to accept the simple ones. She also provides some useful tips to help us overcome these common barriers.

We have written numerous articles encouraging you to put a plan in place to give yourself the best chance of achieving your financial goals. But a plan on its own is not enough, and it counts for naught if you don't take any action.

A study recently conducted by the Brazilian Financial and Capital Markets Association (ANBIMA) revealed some useful insights into differences in our approaches to planning. The study asked 450 people between the ages of 18 and 70 years, across income bands, to plot their financial lives up to that point. Their responses revealed five personas that describe how different people engage with their lives and with money over time. The study was conducted on Brazilians (are they different to the rest of us?), but it rings true; you may recognise yourself or your family and friends among the personas outlined below.

Which persona are you?
1. The Builder: This type of person grows slowly and consistently, focusing on just each next step, rather than a distant goal, with no clear long-term plan. Changes in lifestyle and financial capacity are incremental.

2. The Carefree: There is no clear or direct upward trend with regards to lifestyle or finances. Instead, this type of person tends to respond to the changing directions their life takes from time to time. They see themselves as being "open to the flow of life".

3. The Chameleon: The key feature of this persona is the ability to find solutions to any scenario they find themselves in. Financially, this type of person would somehow make things work regardless of circumstance. Unlike the Carefree type, this persona "makes do", as opposed to actively moving in any direction or building financial capacity.

4. The Dreamer: These are people who are led by their dreams, but do not use structured plans to reach them. Instead, their dreams serve as motivation for forward movement, and motivation for action.

5. The Planner: This type calculates their goals and have a clear, structured plan to reach them. Each step taken is part of an overall plan towards set goals. When things change, the plan needs to change too.

Most people in the study, even the Planners, did not see money itself as a goal but rather as an enabler. We are not motivated to reach an amount, but rather we are motivated by important events and experiences. What this means practically is that rather than trying to figure out the exact amounts we need to reach specific financial goals, it may be better to simply get started and keep going.

Read the full article here: https://www.allangray.co.za/latest-insights/personal-investing/the-simple-answers-to-investing/ 

April 16 2018 By Wanita Isaacs, Allan Gray.