If you said, “they are all difficult to predict,” you would be right. Although, of all three, Molly is the easiest to predict. For example, when my wife goes to the kitchen for any reason, Molly expects to be fed. It took Molly only a few short weeks to train Kathy as her slave, but Molly’s persistence paid off.

But what of the human brain and the stock markets? It is known that we only use 10 percent of our brains, but that is not true. The human brain is complex, with more neuronal connections than there are stars in the universe. Let’s think of the brain like a footy team. Using AFL as an example, we might field a side with 24 players. Of those, two will be on the bench ready to come on at a moment’s notice. The remaining 22 players, all on the field, do what their positions require. But they will not all be busy at the one time.

Our brain is much like an AFL team. We use all of our brain; just not all at once. That is a good thing because (a) it would be exhausting (the brain uses about 20 percent of our energy) – and (b) we would be in constant conflict with ourselves. Instead, our brain orchestrates a merry opera in which we ramp things up and tamp things down as our circumstances require. For example, when the emotional part of our brain (the limbic system) is in play, the pre-frontal cortex (the thinking, reasoning, decision-making and inhibitory parts of our brain) damps down with the effect. When we are upset, stressed, anxious or excited, we are not doing our best thinking. It’s much like the star forward going off the ground right at the time when kicking a goal is crucial.

You might think this is an interesting lesson on the brain (or not), but what does it have to do with investment markets? Investment markets operate in much the same way, although sometimes less predictably. The Buddy Franklin-like full forward may be seen as somewhat of a stalwart, a match-winner, a sure bet, but he is not a machine and, as such, he is subject to the same human frailties as the rest of us. Stock markets can be like that too. They have ups and downs, ebbs and flows and sometimes, even crashes.

In a bear market, the blue-chip resource stock that supposedly could not lose, might stumble, just as Buddy did on Grand Final Day (sorry not sorry to the Swans supporters!), while other stocks hold or make gains. Even bonds, often thought of as a sure kick, have dipped.

So, what happens when we play the game and lose? It is disappointing but it is only ever a moment in an arbitrarily punctuated point in time. It is not the end. There is another day, another season, another chance.

Not often do we think this way, but what happens in the world happens – what one person sees as good, the other sees as harmful. Events are neutral; it is our reaction, strongly shaped by our past experiences, that decide whether it is good or bad. For example, when stock markets take a hit, we may view that negatively particularly if we have a holding. However, what if we want to buy into the market? A dip or tumble could present wonderful opportunities. Understanding where our position falls against our long-term strategy is important as is tamping down our limbic system and ramping up our pre-frontal cortex.

It was once said that the only certainties in life are death and taxes. I would change that to “very little stays the same.” This brings us to the need to be both informed and prepared. This is why, at The Investment Collective, we take the time to understand your circumstances, aspirations and risk appetite. We work with you to effectively balance your portfolio such that when one player stumbles, others can help fill the void. Sometimes, almost an entire team can have a bad game. It happens, players will be traded, others retire, but many will be retained because they are the heart of the team and the heart of the team beats strong.

The market has taken a tumble; the rollercoaster is in motion. We do not know when the ride will end. However, we have an ever-vigilant eye on geo, political, economic and social trends coupled with up-to-date research on the companies within your portfolio. This better positions us, as the coaching team, to steer you to a win at the Grand Final.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.