Investors must learn not to panic and to invest based on evidence and a long-term outlook rather than on “emotional whims”, according to the head of digital wealth manager Endowus.
To avoid being “thrown into emotional circles” during market turmoil such as the world saw in recent weeks, investors must understand their investment horizons and their goals, said Gregory Van, co-founder and CEO.
“Behavioural finance plays an enormous role in long-term success as an investor,” he said. “But in order to control your behaviour, you need to understand how the markets work. You need to first understand the financial science – the evidence for why a basket of assets will appreciate over time and why it’s suitable for the purpose of your investment.”
“When things start to go sour, [the market] unwinds on itself extremely quickly, faster than anyone can really control,” Van said.
This is why personal goals and the intended duration of one’s investments are crucial to determining which assets are suitable.
“Simply owning a stock or owning a cryptocurrency or owning a single bond or a small basket of bonds is not an evidence-based approach,” Van said.
Investors who choose that approach “are just at the whims of the market, of that company, or of that CEO”, he said.
“Being too concentrated on one investment is OK when you’re speculating and gambling, but not when you’re investing wealth.”
When people understand what they are investing towards and are properly positioned within the market, then the market can yield “incredible returns”, he added.
Singapore-based Endowus, founded in 2017, is a low-cost, digital, independent wealth adviser and fund platform offering a range of services to retail, high-net-worth and family-office clients. It has more than US$5 billion of assets under advice.
The company has significantly grown its team, almost doubling its headcount this year alone. The firm now has about 80 fund managers on its platform across the public markets, private markets and hedge funds.
Hong Kong retail investors are increasingly grasping the importance of improving their financial literacy as well as the need to choose appropriate wealth-management services, Van said.
“People in Hong Kong are starting to realise what it means to get conflict-free wealth services [and to access] real advice, real suggestions in terms of strategies and portfolios that suit people’s goals,” he said.