Have you ever made an irrational or impulsive purchase you’ve later regretted? We all make decisions based on our emotions or personal biases, but when it comes to investing, such mistakes can be very costly.

What is behavioural investment?Behavioural investment is an approach that acknowledges how our emotions and our biases can sometimes make decisions for us. During periods of geopolitical uncertainty and heightened risk, behavioural investment biases can become even more pronounced, tempting you into making poor decisions. Here are some impulses that often lead to bad investment decisions:

• Loss aversion: Investors worry about their investments falling further in value, so they sell them prematurely, locking in losses and missing out on potential rebounds
• Herd mentality: When markets fall, people tend to panic, follow the crowd and sell their investments. This ‘herd mentality’ means markets keep falling, as more people panic and sell, creating a spiral.
• Confirmation bias: Investors let their own opinions dictate their actions and often seek out information that confirms their existing fears, ignoring evidence that contradicts their own impulses
• Overconfidence: Some investors believe they can predict the market’s reaction to geopolitical events, leading them to make risky bets that could ultimately backfire.

Avoiding behavioural biases

Investors often need to worry less about geopolitical events and more about avoiding making poor decisions. Worry not, you’re in safe hands. We can create a plan and stick to it, so we focus on longer-term goals, rather than risk getting distracted by short-term noise. We will build a resilient portfolio, spreading your investments across different asset classes to manage risk. Rest assured, we will make well-considered, researched investment decisions to increase your chances of achieving your long-term financial goals.

At times in the past two years, it seemed to some that inflation would never come down. Double-digit inflation became routine. Now, with price rises back near normal levels, optimism is returning to financial markets.

Disinflation diaries

Inflation has fallen well below the multi-decade highs witnessed in many countries since 2022. In response, central banks around the world now
look set to ease monetary policy in the coming months.

Indeed, some central banks, including those in emerging markets, have already started cutting rates. In recent months, policymakers in Mexico, Brazil, the Czechia, Hungary and Colombia have started, or increased, easing efforts.

The ‘last mile’

As developed countries bring monetary policy back towards more normal levels, some analysts are talking about the ‘last mile’ for disinflation.

Certainly, after a long period of high inflation, falling inflation rates are a welcome relief for many. In the UK, inflation has eased significantly from the 41-year-high of 11.1% recorded in October 2022.

For all this optimism, however, there are some warnings that the final stretch will not be a stroll in the park.

Bumps in the road

In Australia, consumer price inflation rose to a five-month high in April, a figure that surprised analysts. The uptick was blamed on increases in petrol, health
and holiday costs.

Meanwhile, the International Monetary Fund (IMF) has released a Global Financial Stability Report warning that geopolitical tensions, strains in commercial real estate and debt vulnerabilities all remain acute risks for the global economy in the months and years ahead. The IMF pointed to recent evidence that disinflation may have stalled in some countries, suggesting that inflation may be persistent in some sectors.

If you thought your pension was just your retirement savings then think again.

As well as ensuring your financial certainty when you want to stop working, a pension is a great way to support future generations. This is because defined contribution pensions are one of the most tax-efficient ways of passing on your wealth.

No tax troubles

Unlike Individual Savings Accounts (ISAs), pensions usually sit outside your estate for Inheritance Tax (IHT) purposes. This means that the money inside your defined contribution pension can be passed onto your loved ones without any IHT going to the taxman.

Pass it on

It’s no secret that many of today’s young people are facing financial pressures. Alongside your wisdom, a tax-efficient gift of a pension might be one of the best things you can pass along to the next generation.

Even better, your loved ones will usually inherit the pension itself rather than the money inside it. This means they can continue to benefit from all the tax advantages, including tax-free investment growth. There is the separate option of starting a pension plan, within limits, for a child, rather than (or in addition to) leaving them yours.

Of course, passing a pension on might not be the best choice for everyone. We’re here to help you.