What should you ask in your mid-year investing MOT?

With such a challenging year for investors it is worth asking whether you should do things differently to stay on track for the rest of the year and beyond. Asking the right questions – and not ignoring difficult implications – can help you determine if you need to change your investment behaviour.

What mistakes did you make this year?

When markets tumble it is outside of your influence and not your fault. Yet within the broad framework of investing there are factors you can control. So the impact of market fluctuations aside, are there things you could have done differently this year?

For example, have you tried to get in and out of the market during times of extreme volatility? Have you made investments that you would usually avoid to try and recoup losses – such as in single stocks or companies that have an exciting, but perhaps riskier reputation. Has impatience got the better of you, prompting you to act in ways that may contradict a more conservative approach?

Answering these questions honestly puts you in a position to consider what changes you could and should make.

Is your investment strategy right for you?

This speaks to your fundamental philosophy and outlook – do you believe in the potential of active management or are you comfortable with a passive strategy that matches the returns of markets?

The difference can be meaningful. While individual active fund managers may beat the market over a year or two it is incredibly rare for them to deliver outperformance over a sustained period. Even in a downturn when they are widely acclaimed to have an edge, time and time again their implied advantage is not borne out by the facts.

Being an active or passive supporter shouldn’t fundamentally matter – your decisions should be driven by what you want to achieve. Look at the facts impartially, try to disregard the inevitable noise, and then consider how to best attain your goals.

What may have caused your mistakes and can you rectify them?

While the coronavirus and the ensuing social and economic impact disrupted markets, what prompted you to respond, or even overreact? Most of the time we are not rational actors and are driven by our emotions. This can lead to biases in how we behave with money, which typically comes at a cost.  

Could you have been overconfident in your ability to time a market entry or exit? Did you follow the herd in buying a ‘hot’ stock? Did you make a decision based on information which is too readily available? Have you held off on what could be a key investment decision to improve your long-term returns, such as moving to a more cost-effective manager?

Recognising the potential effects of these biases can help us to look at information objectively – and to try and assess whether taking action, or not acting at all, will make a difference to our wealth.

Are you open to changing your mind?

“When the facts change, I change my mind” is a quote widely attributed to the famed economist John Maynard Keynes and often cited as a rationale for reversing a decision. Yet it is an equally valid course of action if the facts haven’t changed, but your knowledge or interpretation of them has.

For example, many investors are surprised by the significant effects of paying just 1% more in fees each year or the erosive impact of even low inflation on how long a retirement fund can last. But when you realise these factors, are you willing and able to change course?

There are countless other questions you can ask around your specific goals and circumstances. Answering them frankly and making any necessary changes may not provide an immediate panacea, but they will help you to avoid making the same investment mistakes.


If you want to know if you are asking the right questions about how to protect and grow your wealth, please get in touch.


Please note, the value of your investments can go down as well as up.

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