[LISTEN] It's very important to have a thorough process around deciding on your asset allocation & one to mitigate against being sucked into investment biases: Satrix's Kinglsey Williams on MoneywebNOW with Simon Brown. Download the podcast
SIMON BROWN: I’m chatting with Kingsley Williams, chief investment officer at Satrix. Kingsley, I appreciate the time. At the recent investment forum you were presenting on ‘Investing Mirrors Life: How Biases Affect Our Investment Decision Making’, the whole conversation around biases is one that absolutely fascinates me, and truthfully as human beings we are we are riddled with biases across probably almost everything we think.
SIMON BROWN: It absolutely can’t. It’s simple Maths 101. Half of us have to be worse off. In the investing world it comes to, I suppose, everyone who is sort of either managing their own money or employing someone to manage it on their behalf via a collect investment scheme or the like. But in the active space we all do it, because we assume we are in the top half. But the stark reality is that half of us are in the top half and, after costs, less than half.
So relative to a market benchmark which doesn’t have costs, there is only a minority of funds or investment strategies or investors that will ever outperform, and the data bears it out. KINGSLEY WILLIAMS: Exactly right. I think one that we don’t have to look too far [for] or be reminded of, particularly with us being surrounded by a lot of negative news at the moment, is that this temptation to invest offshore as a sure-fire way to generate better returns or superior returns is a commonly held bias that often subscribes to our confirmations and heuristics and rules that we apply in our lives to make decisions.
But an interesting point that you also made: you talk around ‘anchoring’ and how a lot of anchoring where you kind of find something to stick to. One example is Regulation 28, which says 45% offshore. So a lot of fund managers and individuals will go with 45% offshore. It is very undervalued and so the expected returns going forward are actually quite attractive for our local market.
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