What is the single biggest threat facing investors right now? Forget volatile stock markets, crashing economies, social unrest, trade wars or even Covid-19, and take a look in the mirror instead.
The greatest obstacle standing in the way of building long-term investment wealth for your retirement is you. The human brain is poorly adapted to investing, as it is apt to make emotional decisions, rather than rational ones.
Fear is a major threat to your wealth. It can take over during a stock market crash, persuading you to sell shares at the bottom of the market. Investors who panicked and sold during the March collapse lost out as share prices recovered almost as quickly.
Primal responses can overwhelm rational thinking, making markets prone to bubbles and runaway crashes.
Greed can be just as dangerous. It can trick you into gambling on high-risk investments such as Bitcoin in the hope of getting wealthy overnight, or lure you into get-rich-quick schemes designed to swallow your money.
Fabian Chui, global head of front office and risk at Abu Dhabi-based financial services firm ADSS, says entire stock markets can be swayed by emotional extremes. "Primal responses can overwhelm rational thinking, making markets prone to bubbles and runaway crashes," he says.
Exuberance, overconfidence and greed combine to fuel asset bubbles, while fear creates self-fulfilling crashes, Mr Chui says. “In both cases, investors lose all objectivity. The ability to determine the fair value of an asset gives way to emotions,” he adds.
Justin Waring, investment strategist at UBS Global Wealth Management, says despite thousands of years of evolution, humans still haven't outgrown our "fight or flight" response, and overreact to short-term market threats and opportunities. “As a result, investors buy high and sell low, sometimes with disastrous consequences,” he says.
Professor Stephen Thomas, associate dean, MBA Programmes at Cass Business School in Dubai and London, says a study by investor behaviour specialists Dalbar found that between 1986 and 2015, the US S&P 500 produced an average annual return of 10.35 per cent, but the average investor generated just 3.66 per cent a year.
He blames the discrepancy on investors making emotionally driven decisions in volatile markets. “At the height of the financial crisis in October 2008, the S&P500 dropped 16.8 per cent but the average investor lost more than 24 per cent as they panicked and bailed out, missing the recovery towards the end of the month,” he says.
Private investors respond the same way every time markets crash, Mr Thomas says. “They are prone to selling too late, in other words after share prices have crashed, then buying too late, after the recovery. Ultimately it culminates in yet another very human emotion. Regret.”
Demos Kyprianou, a board member of SimplyFI, a non-profit community of personal finance and investing enthusiasts in Dubai, says pride and overconfidence are also deadly: “Too many investors think they are cleverer than other people, and have the skills to beat the market. In the vast majority of cases, they are kidding themselves.”
Overconfident investors typically trade too often, buying and selling shares in a bid to beat the market, when history shows that almost nobody can reliably do that for long periods. In 2019, more than 70 per cent of large-cap fund managers underperformed the S&P 500. The longer they invest, the worse they perform, according to the Spiva scorecard, which measures actively managed funds against their relevant index benchmarks worldwide. Measured over five years, 80 per cent underperformed, the scorecard found. So, if the experts cannot reliably beat the market, then what chance do you have?
You also have to overcome your own apathy and fear of the unknown, which deters many from investing until it is too late to accumulate the wealth they need to retire in comfort, Mr Kyprianou says. “Too many people think it is too difficult, when in fact it is surprisingly simple, provided you keep your emotions out of it.”
So how do you master your emotions? Mr Kyprianou recommends investing in passive exchange traded funds (ETFs) that simply track the performance of global stock markets.
That way you are not trying to beat the market, which means your ego is not on the line.
He says you can build a diversified range of shares through a one-stop global equity ETF such as the Vanguard FTSE All-World UCITS ETF (VWRL). “You will never beat the market but you will never underperform, either, while keeping fees and other trading charges to a minimum, so you keep more of the growth for yourself,” he says.
Mr Kyprianou suggests balancing it with a bond ETF, to reduce the overall volatility of your portfolio when share prices crash. A popular option is the iShares Global Govt Bond UCITS ETF (IGLA), which invests in government bonds from G7 countries Canada, France, Germany, Italy, Japan, UK and the US.
Mr Chui says o avoid becoming prey to your own emotions you need to set clear investment objectives from the outset, then remember them when markets go haywire. "Ask whether you are buying a dip because of fear of missing out, or because you really see value from oversold conditions,” Mr Chui says.
Holding a diversified spread of investments can also help, by limiting your losses in a crash. If you invest purely in shares, your portfolio will be more volatile than if you balance this out with other asset classes such as bonds, gold, property and cash.
Taking a long-term view can also help soothe your emotions. If you are investing over 30 or 40 years, as you should be, then a short-term crash is nothing to panic about.
In fact, it is an opportunity to buy shares at a reduced price with the aim of holding for the long term, as markets always recover if you can stay calm and give them enough time.
Mr Waring says another way to keep your emotions in check is to "quarantine" your decisions, by thinking them over for a week or two as "this can help you filter out decisions driven by emotions".
Automating your portfolio can also help, he says. “Commit to an asset allocation strategy, say, investing 60 per cent in stocks and 40 per cent in bonds, with an automatic rebalancing system to keep your portfolio in line with this strategy,” Mr Waring says.
So if shares rise, you take your profits and buy bonds, or vice versa. This has the further advantage of selling high and buying low.
Mr Waring says beware of another dangerous emotion – loss aversion – because "people feel the pain of losses about twice as powerfully, as they feel the pleasure from making gains".
As we saw in March, most losses happen over short periods, and you need to hold your nerve to give them time to recover. To help you stand firm, Mr Waring recommends setting aside a pool of safer investments to meet everyday spending, so you do not have to sell shares during a short-term crash. "As we have seen this year, being forced to sell risk assets in a dip means you can miss out on powerful gains when markets recover,” he adds.
You will never be able to completely curb your emotions, but the more you can control them, the wealthier you should ultimately become. If you can do that, your overriding emotion should be happiness.
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
UAE WARRIORS RESULTS
Featherweight
Azouz Anwar (EGY) beat Marcelo Pontes (BRA)
TKO round 2
Catchweight 90kg
Moustafa Rashid Nada (KSA) beat Imad Al Howayeck (LEB)
Split points decision
Welterweight
Gimbat Ismailov (RUS) beat Mohammed Al Khatib (JOR)
TKO round 1
Flyweight (women)
Lucie Bertaud (FRA) beat Kelig Pinson (BEL)
Unanimous points decision
Lightweight
Alexandru Chitoran (ROU) beat Regelo Enumerables Jr (PHI)
TKO round 1
Catchweight 100kg
Marc Vleiger (NED) beat Mohamed Ali (EGY)
Rear neck choke round 1
Featherweight
James Bishop (NZ) beat Mark Valerio (PHI)
TKO round 2
Welterweight
Abdelghani Saber (EGY) beat Gerson Carvalho (BRA)
TKO round 1
Middleweight
Bakhtiyar Abbasov (AZE) beat Igor Litoshik (BLR)
Unanimous points decision
Bantamweight
Fabio Mello (BRA) beat Mark Alcoba (PHI)
Unanimous points decision
Welterweight
Ahmed Labban (LEB) v Magomedsultan Magomedsultanov (RUS)
TKO round 1
Bantamweight
Trent Girdham (AUS) beat Jayson Margallo (PHI)
TKO round 3
Lightweight
Usman Nurmagomedov (RUS) beat Roman Golovinov (UKR)
TKO round 1
Middleweight
Tarek Suleiman (SYR) beat Steve Kennedy (AUS)
Submission round 2
Lightweight
Dan Moret (USA) v Anton Kuivanen (FIN)
TKO round 2
THE SPECS
Engine: 3.5-litre supercharged V6
Power: 416hp at 7,000rpm
Torque: 410Nm at 3,500rpm
Transmission: 6-speed manual
Fuel consumption: 10.2 l/100km
Price: Dh375,000
On sale: now
About Karol Nawrocki
• Supports military aid for Ukraine, unlike other eurosceptic leaders, but he will oppose its membership in western alliances.
• A nationalist, his campaign slogan was Poland First. "Let's help others, but let's take care of our own citizens first," he said on social media in April.
• Cultivates tough-guy image, posting videos of himself at shooting ranges and in boxing rings.
• Met Donald Trump at the White House and received his backing.
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
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The candidates
Dr Ayham Ammora, scientist and business executive
Ali Azeem, business leader
Tony Booth, professor of education
Lord Browne, former BP chief executive
Dr Mohamed El-Erian, economist
Professor Wyn Evans, astrophysicist
Dr Mark Mann, scientist
Gina MIller, anti-Brexit campaigner
Lord Smith, former Cabinet minister
Sandi Toksvig, broadcaster
Our legal advisor
Ahmad El Sayed is Senior Associate at Charles Russell Speechlys, a law firm headquartered in London with offices in the UK, Europe, the Middle East and Hong Kong.
Experience: Commercial litigator who has assisted clients with overseas judgments before UAE courts. His specialties are cases related to banking, real estate, shareholder disputes, company liquidations and criminal matters as well as employment related litigation.
Education: Sagesse University, Beirut, Lebanon, in 2005.
The specs
Engine: 2.0-litre 4-cylinder turbo hybrid
Transmission: eight-speed automatic
Power: 390bhp
Torque: 400Nm
Price: Dh340,000 ($92,579
UAE currency: the story behind the money in your pockets
UAE squad
Esha Oza (captain), Al Maseera Jahangir, Emily Thomas, Heena Hotchandani, Indhuja Nandakumar, Katie Thompson, Lavanya Keny, Mehak Thakur, Michelle Botha, Rinitha Rajith, Samaira Dharnidharka, Siya Gokhale, Sashikala Silva, Suraksha Kotte, Theertha Satish (wicketkeeper) Udeni Kuruppuarachchige, Vaishnave Mahesh.
UAE tour of Zimbabwe
All matches in Bulawayo
Friday, Sept 26 – First ODI
Sunday, Sept 28 – Second ODI
Tuesday, Sept 30 – Third ODI
Thursday, Oct 2 – Fourth ODI
Sunday, Oct 5 – First T20I
Monday, Oct 6 – Second T20I
APPLE IPAD MINI (A17 PRO)
Display: 21cm Liquid Retina Display, 2266 x 1488, 326ppi, 500 nits
Chip: Apple A17 Pro, 6-core CPU, 5-core GPU, 16-core Neural Engine
Storage: 128/256/512GB
Main camera: 12MP wide, f/1.8, digital zoom up to 5x, Smart HDR 4
Front camera: 12MP ultra-wide, f/2.4, Smart HDR 4, full-HD @ 25/30/60fps
Biometrics: Touch ID, Face ID
Colours: Blue, purple, space grey, starlight
In the box: iPad mini, USB-C cable, 20W USB-C power adapter
Price: From Dh2,099
Six large-scale objects on show
- Concrete wall and windows from the now demolished Robin Hood Gardens housing estate in Poplar
- The 17th Century Agra Colonnade, from the bathhouse of the fort of Agra in India
- A stagecloth for The Ballet Russes that is 10m high – the largest Picasso in the world
- Frank Lloyd Wright’s 1930s Kaufmann Office
- A full-scale Frankfurt Kitchen designed by Margarete Schütte-Lihotzky, which transformed kitchen design in the 20th century
- Torrijos Palace dome
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
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UAE finals day
Friday, April 13
Rugby Park, Dubai Sports City
3pm, UAE Conference: Dubai Tigers v Sharjah Wanderers
6.30pm, UAE Premiership: Dubai Exiles v Abu Dhabi Harlequins
RESULTS
Time; race; prize; distance
4pm: Maiden; (D) Dh150,000; 1,200m
Winner: General Line, Xavier Ziani (jockey), Omar Daraj (trainer)
4.35pm: Maiden (T); Dh150,000; 1,600m
Winner: Travis County, Adrie de Vries, Ismail Mohammed
5.10pm: Handicap (D); Dh175,000; 1,200m
Winner: Scrutineer, Tadhg O’Shea, Ali Rashid Al Raihe
5.45pm: Maiden (D); Dh150,000; 1,600m
Winner: Yulong Warrior, Richard Mullen, Satish Seemar
6.20pm: Maiden (D); Dh150,000; 1,600m
Winner: Ejaaby, Jim Crowley, Doug Watson
6.55pm: Handicap (D); Dh160,000; 1,600m
Winner: Storyboard, Richard Mullen, Satish Seemar
7.30pm: Handicap (D); Dh150,000; 2,200m
Winner: Grand Dauphin, Gerald Mosse, Ahmed Al Shemaili
8.05pm: Handicap (T); Dh190,000; 1,800m
Winner: Good Trip, Tadhg O’Shea, Ali Rashid Al Raihe
Seven tips from Emirates NBD
1. Never respond to e-mails, calls or messages asking for account, card or internet banking details
2. Never store a card PIN (personal identification number) in your mobile or in your wallet
3. Ensure online shopping websites are secure and verified before providing card details
4. Change passwords periodically as a precautionary measure
5. Never share authentication data such as passwords, card PINs and OTPs (one-time passwords) with third parties
6. Track bank notifications regarding transaction discrepancies
7. Report lost or stolen debit and credit cards immediately
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Five famous companies founded by teens
There are numerous success stories of teen businesses that were created in college dorm rooms and other modest circumstances. Below are some of the most recognisable names in the industry:
- Facebook: Mark Zuckerberg and his friends started Facebook when he was a 19-year-old Harvard undergraduate.
- Dell: When Michael Dell was an undergraduate student at Texas University in 1984, he started upgrading computers for profit. He starting working full-time on his business when he was 19. Eventually, his company became the Dell Computer Corporation and then Dell Inc.
- Subway: Fred DeLuca opened the first Subway restaurant when he was 17. In 1965, Mr DeLuca needed extra money for college, so he decided to open his own business. Peter Buck, a family friend, lent him $1,000 and together, they opened Pete’s Super Submarines. A few years later, the company was rebranded and called Subway.
- Mashable: In 2005, Pete Cashmore created Mashable in Scotland when he was a teenager. The site was then a technology blog. Over the next few decades, Mr Cashmore has turned Mashable into a global media company.
- Oculus VR: Palmer Luckey founded Oculus VR in June 2012, when he was 19. In August that year, Oculus launched its Kickstarter campaign and raised more than $1 million in three days. Facebook bought Oculus for $2 billion two years later.
if you go
The flights
Direct flights from the UAE to the Nepalese capital, Kathmandu, are available with Air Arabia, (www.airarabia.com) Fly Dubai (www.flydubai.com) or Etihad (www.etihad.com) from Dh1,200 return including taxes. The trek described here started from Jomson, but there are many other start and end point variations depending on how you tailor your trek. To get to Jomson from Kathmandu you must first fly to the lake-side resort town of Pokhara with either Buddha Air (www.buddhaair.com) or Yeti Airlines (www.yetiairlines.com). Both charge around US$240 (Dh880) return. From Pokhara there are early morning flights to Jomson with Yeti Airlines or Simrik Airlines (www.simrikairlines.com) for around US$220 (Dh800) return.
The trek
Restricted area permits (US$500 per person) are required for trekking in the Upper Mustang area. The challenging Meso Kanto pass between Tilcho Lake and Jomson should not be attempted by those without a lot of mountain experience and a good support team. An excellent trekking company with good knowledge of Upper Mustang, the Annaurpuna Circuit and Tilcho Lake area and who can help organise a version of the trek described here is the Nepal-UK run Snow Cat Travel (www.snowcattravel.com). Prices vary widely depending on accommodation types and the level of assistance required.
