A Lesson from October 1987 for Today

16.09.2016 • Investing

From Gowdie Family Wealth (Australia) –

Photo Credit to the NY Daily News.

With October fast approaching, I find myself — for a variety of reasons — having moments of reflection.

In October 1986, my financial planning career commenced.

The naivety of youth made me think my experience in the banking and finance sector would serve me well in this new and exciting industry.

Not so.

The financial planning industry (or investment advisory industry, as it was known then) was all about cold calls, prospecting and meeting sales targets. Concepts totally foreign to me.

Client presentations were all based on a programmed sales pitch and the use of past returns.

A basic understanding of markets was a bonus, but certainly not a prerequisite for a novice (or even an experienced) advisor. In fact, a deep knowledge of markets would have been a potential career killer. If you had predicted the heady days of the entrepreneurial bubble were numbered, the advice to potential investors would have been to stay in cash.

There was no commission payment for advising people to keep their money in the bank…even if it was the best course of action.

Ignorance was bliss.

12 months later, the fledgling investment advisory industry received the first of many lessons.

Markets came crashing down on ‘Black Monday’…19 October, 1987.

That day is forever etched in my mind.

The office atmosphere was electric — a mixture of shock and awe.

Phones rang constantly.

Clients wanted reassurance all would be OK.

Others wanted to sell.

Now that I’m older and somewhat wiser, I realise not a single client called to enquire about investing new money.

Yet only weeks or months earlier, they were falling over themselves to buy into a market that was much higher in price and lower in value.

At the time, I have to admit I was in panic mode. After all, who would be crazy enough to buy into this market mayhem?

We are a strange lot when it comes to investing. The power of greed and fear makes us irrational.

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