25 March 2022

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Financial advisor and moments of fear

Author: Luigi Campopiano

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Lenin stated: “There are decades in which nothing happens. And then of the weeks in which decades happen ”. It is a phrase that sounds sinister having been uttered by a Russian politician; in fact, this is precisely what is happening: in a few days Europe, which had lived in peace since the end of the Second World War, finds itself having to face a situation that closely resembles that experienced at the end of the 1930s.

The values put under attack in Ukraine these days (peace, freedom, democracy, culture, the principle of self-determination, health) are non-negotiable values and everyone's heritage. But after these, for us who live in Italy, there is also the protection of savings, which is actually sanctioned by art. 47 of the Constitution. Today we see, due to the war, the values of our money fluctuate and we are afraid, that fear (irrational and primitive feeling) that leads us to have emotional, instinctive, and primordial reactions that risk being counterproductive in an area such as the financial one in which it usually takes a rational and sometimes counterintuitive behavior to get the results we wanted to achieve when we started our investment.

The news of recent days, with the intensification of the bombings, civilian casualties, the siege of the capital and the shelling in the immediate vicinity of the nuclear power plant has further frightened investors, especially Europeans. But fear, even if justified, is not the best counselor: it leads to making instinctive moves, divest everything immediately, and then regret it bitterly. Opening the evening news and seeing that prices continue to fall day after day puts a strain on the resistance of investors/savers, even if we know that, historically, crises due to geopolitical events are intense and violent but usually short (yes has trouble keeping a cool head). However, as our portfolios are validly diversified, the impact is certainly important but definitely recoverable.

In these moments we must remember that the real ally of investors is time, the only bulwark against short-term fluctuations. Time mitigates these fluctuations, making the investment less volatile as time passes.

As a financial consultant, it is a must to make clients understand and motivate that it is only in moments of great decline and loss that enormous opportunities can be seized.