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The British obsession with short-term investing – and mine with kissing!

24th Jun 2016
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Investing for the long term is the only wise strategy for your clients to take, argues Roddy Kohn

Hands up those of you who would contemplate getting married to a complete stranger on impulse. Keep your hands up if you’d still choose to marry someone who you know you would only be married to for just six months? And keep your hand up still if you know that that same short-term marriage and divorce would most likely cost you some of your hard earned assets?

If anyone reading this has their hand up at the first question, never mind. Those of you still holding your hand up after the third one need to re-think your marital plans! And yet for nearly 40 years this is exactly what I have seen investors do, aided and abetted by a virtually retarded media obsessed with the notion that consumers must have incessant amounts of hype (they call it data) about where to invest.

Now I know you're all going to write in and say that looking at the author’s picture it’s not possible for him to proffer 40 years’ experience of such matters. How kind! But I tell you, in all seriousness, that short-term investing and short-term marriages just don't work (I’m less of an authority on marriages, I hasten to add). So why do we do it? Why invest with such short-term time horizons? Partly it’s the fault of regulation. The amount of paperwork thrust upon the average investor has done nothing to educate them. And yet if you could wind back time you would hear argument after argument from the great and good about how having six monthly statements, investment projections and so on would all serve the consumer well.

What never ceased to amuse me during those times is how all those wise investor regulators, consumer body representatives and so on had guaranteed government pensions schemes, health benefits and almost to a man or woman never, and I mean never, sought advice from an impartial professional adviser! Yet somehow they felt qualified to set policy on investment issues. Of course, now they have moved on and investors themselves are, largely, left to try to make sense of the mess.

They, in turn, very understandably choose not to try. Seeking advice is perceived as expensive until you count the cost of not taking it. Their confidence thus sapped by errors of judgement, confusion and often well meaning but ill informed friends and relatives, they finally collapse in despair.

 And, for good measure, thrust upon them is the odd financial calamity accompanied by Pavlovian style bell ringing and (historic) pictures of some depressed, suicidal trader ringing his or her hands in despair at the news that “markets saw billions wiped off them today when xyz happened in the markets...”

Strangely enough, an equally sonic and bombastic announcement when markets rally and add billions to their value is never heard. Journalists on the local rag rarely write of any good news, having been groomed in the Lord Beaverbrook mantra that “good news is ok but bad news sells newspapers”.

So if you are going to advise your clients to invest, remember it’s not really about how good value a pension investment is or how much income tax might be saved by building a nice capital gains and income tax free ISA portfolio. Instead, think only of ‘KISS-ing’. It’s a handy old army saying that stands for “Keep It Simple, Stupid” and tell your clients that anything less than a six years’ investing horizon is folly. This way confidence, common sense and no shortage of very handsome returns can and will be achieved.

• Roddy Kohn is Managing Partner at KohnCougar ([email protected])

This article is taken from “Accounting Practice” the ICPA quarterly magazine. Dedicated to supporting and promoting the needs of the general practitioner. You can find us at www.icpa.org.uk or email [email protected] or by phone on 0800-074-2896.

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