Financial markets are increasingly becoming part Australia’s wealth generation mix. Nearly half of the adult population holds investments outside of their home and Superannuation Funds. Yet, many are beset by two challenges: they make emotional investment decisions and cannot keep up with the deluge of market data.
Emotions cloud our judgement. According to one study, investor panic resulted in a loss of 8-15% of assets over a 10-year period. Volatility exacerbates the problem. The fear of loss leads people to sell when prices are low, while greed leads them to buy when prices are high. This vicious cycle can be detrimental to your investment goals and, often, your future.
The never-ending flow of data doesn’t help. Trying to make sense of price movements, analyst reports, news sentiment, corporate filings, macro-economic indicators and many other data points is exhausting and can lead to analysis paralysis. Less experienced investors are most affected. As the mountain of available data grows, so too does the challenge.
It is not surprising that Australia’s investors struggle with market volatility, fear of investment underperformance and difficulty identifying the best companies. Where managers and advisors were once the only solution, advances in technology have paved the way for cheaper and more convenient pathways to overcome these challenges. AI is chief among them.