To risk or not to risk it – a conflict of (investing) emotions

This article is the first in a new thought leadership series from the team at LENSELL.

Benjamin Graham, the American economist popularly known as the father of value investing said that, ‘‘The essence of investment management is the management of risk not the management of returns”.

But how much of that advice do investors actually take?

Most Australian investors declare themselves averse to taking high levels of risk. That is, 83% say that they would only take a medium or low level of risk when investing, or no risk at all[1].

However, when selecting investments, potential return is the top declared consideration by 65% while the potential risk is a top priority only for 48%.

Why this discrepancy?

It may be because people are showered everyday with return-based recommendations.

Also, social investing, while cool, often triggers investment decisions not in synch with investors’ risk tolerance. Same goes for online recommendations that impact on people’s investment decisions.

So, when it comes to selecting best investments for themselves, it’s often a ‘finger in the air’ approach that many take.

In this article the team at LENSELL looks at what Australian investors did in 2021, and how some of the popular recommendation websites may mould their behaviour in 2022.

Read more: www.linkedin.com/pulse/risk-conflict-investing-emotions-lensell-group

Contact the team with any questions at: [email protected]

[1] 2020 ASX Investor Study Report