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Personal investing

How you can influence your investment outcomes

After an undeniably tough 2018, the local market staged a turnaround during the first quarter. But the atmosphere in the country is blowing hot and cold: As the general election approaches, and the Eskom crisis rages on, there is an undercurrent of uncertainty and markets are hypersensitive to the mood. Investors are understandably feeling anxious.

While we cannot control or accurately predict market movements or macroeconomic factors, this does not mean we have no control of our own financial future. There are various decisions that we can make to ensure a more secure outlook for ourselves, even in the midst of the uncertainty.

Knowing our locus of control

Researchers have long been interested in the notion of perceived control, also known as our locus of control. This is defined as the belief that one has the ability to influence and make a difference in the events that surround one’s life.

In 2013, researchers from the Max Planck Institute for Human Development made some interesting discoveries. The researchers concluded that perceiving one’s life as predictable and within one’s control, can reduce emotions that lead to debilitating states like despair and apathy. The study was the most longitudinal of its kind: It analysed 16 years’ worth of data collected by the Americans’ Changing Lives Study, and tracked participants over a further 19 year follow-up period. The overall conclusions of the research were that higher levels of perceived control are associated with longer lives, and also that perceptions of control diminish with age.

Of course the study acknowledged that adverse life events understandably impact on our perceptions of control. However, what we can take from this research is that, while much of what happens in life is beyond our control, we still have the ability to influence many elements and outcomes of our lives.

Our investments are one such element. In fact, investing is an aspect of our financial future over which we can indeed exercise a high level of control.

Decisions you can make to influence your investment:

As humans we have to accept that a great deal of what happens in the economy – and in life in general – is out of our control. However, it is encouraging and empowering to realise that there are still many decisions we can make to positively influence our investment outcomes, and consequently our own financial futures.

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