How to Tame the Wild Within and Invest Your Money Wisely

The Weekender / Business Day, 16 - 17 October 2006

How do you invest YOUR money? Human beings may be the only species on the planet to invest money, but the way we conduct our financial affairs often bears close resemblance to animal behaviour.

According to a publication produced by acsis, an independent asset consulting and financial planning company, when it comes to investing, four different types of animals best capture human behaviour: the monkey, the squirrel, the hound and the dolphin.

The monkeys are the risk-taking gamblers of the investment kingdom. Restless and intelligent, monkeys seldom pause to worry that after every crest a trough soon follows. A good example of a monkey was Sir Isaac Newton, the discoverer of gravity.

Sadly, like many monkeys, Sir Isaac burnt his fingers with his investments. After coming into a substantial inheritance he invested the lot into the South Sea Company, which was all the rage back in the 18th century. For months, the company did incredibly well and his investment quickly doubled. Sir Isaac then sold his shares, took his profit and pondered his next move. The South Sea Company went from strength to strength, and Sir Isaac couldn't contain himself and soon poured his money back into the stock. Inevitably, the price crashed, and Sir Isaac lost his wealth.

Advice for a monkey: before you invest your money make sure you use a financial planner to assess the risk inherent in any particular investment. Your financial planner will be able to tell you whether your investment strategy is being driven by greed.

The squirrels are nervous investors, apprehensive about events in the global marketplace and quietly determined to stash as many reserves away as possible. The problem with squirrels is that their carefully stored winter goodies often decompose or disappear before they can be reclaimed.

In the real world, inflation is one of the great enemies of the squirrel-like investor. Inflation has a terrifying capacity to consume capital, yet most people are not properly armed to fight it.

Advice for a squirrel: use a financial planner to counsel you to invest your money so that you can harness the power of the market to deliver inflation-beating returns.

The hounds are loud, impulsive spenders, intent on leading the pack and showing off their wares and their success. Always hungry, hounds are vulnerable to chasing their own tail for long periods.

The danger of being like a hound is that you could lose track of the real value of your assets, get into debt and make no provision for the future.

Advice for a hound: put it down on paper. Before you invest your money, make sure you have carefully mapped out your financial strategy and make use of a financial planner to help prevent those hound-like impulses.

The dolphins are the real kings of the personal finance kingdom. Elegant and calm, they weather storms and play amid the sun-dappled waves with equal skill and grace. Dolphins are certain of their direction, and go about their objectives with intelligence.

The example of a dolphin-like investor is Warren Buffett. His strategy is much the same as the one that guides all sensible, successful investors: when you invest your money it is better to be sure of a good result than hopeful of a great one.

Keeping your emotions out of investment decisions and applying intelligent, careful thought to investment options will always stand you in good stead. Dolphins frequently use financial planners when they don't feel qualified to manage their own affairs.

For most, regardless of which animal you may resemble, investing is an activity shrouded in mystery and fraught with danger. Fortunately, you do not have to shoulder the full burden of these decisions. It is important to plot a path somewhere between fear and greed. But few investors have the time or the knowledge to discover this path by themselves. Visit www.fpi.co.za to select a certified financial planner.

Debbie Netto-Jonker, CFP™, is founder of Netto Financial Services and was financial planner of the year in 2001.