Hype and headlines: Why investors are asking the wrong questions

Throw in some economic uncertainty and it’s little surprise that financial advisers are fielding calls from clients about how they should approach their investments.

As Centaur Financial Services CEO Hugh Robertson puts it: 

“There’s genuine uncertainty in the world right now, and that breeds anxiety.”

This viewpoint is highlighted through the top questions that Robertson's clients are asking him, with the budget changes sitting underneath most of the concerns:

• What should we do with residential property now?
• Is a market crash coming?
• How does the recent budget affect our investment plan?
• Should we help our kids financially now rather than waiting?
• Australian shares or global shares?
• Long duration bonds or cash?

Not all of this can be pinned on the government, of course, but the aforementioned anxiety many investors are feeling thanks to heightened global volatility is clear.

Buying the hype?

According to Robertson, the questions are indicative of either losing sight of their plan or not having one in the first place.

“Without a plan to anchor to, it’s easy to react to headlines or a friend’s dinner party opinion instead of your own strategy,” he says.

Direct Wealth financial adviser Shannon Freney similarly notes that the budget changes are “front of mind” for most investors, but adds that a lot of questions he gets are about gaining exposure to the latest growth themes.

“A few months ago it was gold and silver, now we're seeing queries around AI, and the various upcoming IPOs are by far the most common,” Freney says.

When it comes to AI and blockbuster public offerings, he says “media hype around the next big thing” is a major factor.

“AI in particular has gone from a novelty to something embedded in most professional's working lives now, so naturally the relative exposure the average person has to these themes will increase as well,” Freney says.

“There have been more headlines around tech companies in recent years, e.g Nvidia's meteoric increase in share price as well as SpaceX's historic valuation, and anyone with an interest in investments will be drawn towards content regarding the potential tax changes around them.”

Fradley Advice’s Nathan Fradley says there has also been an increase in people asking about specific ETFs of funds and approaches to investing.

“The kinds of things that are usually asked are either using funds from US-based content, or they are jumping to the end goal - like do I put my money into a 'high yield ETF' and live on the income?” he says.

“It's great to see people becoming actively involved in their finances, and using media to do so, especially in the age groups I work with being over 55s; but it’s really hard to tell what is and is not applicable for them, especially when the algorithm feeds them content.”

Putting the cart before the horse

Regardless of what the questions are, the starting point that investors may be missing is whether there is a strategy behind the investment ideas.

“Clients often ask about the best investment; my usual response is to ask them if this is the right investment for them,” Freney says.

This answer points to the counterintuitive reality that the right investment is not necessarily the one with the highest returns. It is also why a lot of investor’s questions are coming from the wrong direction.

“We can consider investment timeframes, risk tolerance and existing investment holdings, and ask questions around whether this addition is going to do what is required to achieve their goal,” Freney adds.

“We spend far less time assessing investments in isolation, and far more time considering how the overall portfolio plays out if everything works as expected - and just as importantly, how it might play out if it doesn't.”

Rather than putting the cart before the horse and jumping straight to the investment, Fradley says the goal needs to be first, then the entity or structure for the portfolio.

“Only then do we look at the investment itself,” he says.

“Often strategies and products are being sold as the solution to a question people don't yet have - which is the wrong way around. Start with the question, decide on the variables that are applicable and you'll find the approach.”

Where this approach gets tough has nothing to do with complexity, it’s simply the need to remain disciplined.

“Stick to the plan through the volatility, since it was built for moments like this. Stay diversified,” Robertson says.

“If you’re anxious, it’s fine to hold a bit more cash right now, as rates aren’t punishing you for it. And make sure you’re invested through the right tax structures, not just the right assets.”

What are the right questions?

In a lot of cases, Freney explains, the idea behind the questions are coming from the right place, even if the question itself is wrong.

Instead of asking “How do I invest in SpaceX?” or “How can I pay less tax on my investments?”, investors need to be asking “Does this asset have a place in my portfolio and does it achieve my intended outcomes?”, or “Is this the most efficient structure for my portfolio for what I'm trying to achieve?”

“Those are the questions that lead to better investment decisions and outcomes,” he says.

Robertson adds that the best questions are those focused on understanding how the shifting environment impacts an investor’s goals.

“Where are the opportunities in this environment? Have our goals changed, and does the plan still reflect them? Should we revisit our strategy and structures given what’s shifted?”

Key takeaways

• Make sure you have a clear strategy.
• Don’t just focus on finding the “next big thing”.
• The right investment depends on your specific timeframe, risk tolerance, and goals.
• Sequence matters: goal, then structure, then investment.