In investments 101, you learn that you need to buy shares when the market is low and sell shares when the market is high. As long-term investors, you have a much better chance of making a profit when you buy undervalued shares.
Currently, the All-Share Index Price-earnings ratio (PE ratio) is close to 8, the lowest since 2008. A low ratio like this may indicate that the market is cheap or undervalued.
Source: Bloomberg | M&G Research
It may seem like the market is presenting us with a buying opportunity. Yet, contrary to what we are taught, investors are doing the opposite and are in fact, selling shares.
The graph below illustrates this by showing the flow of funds. There are significant outflows from high equity unit trust funds (red) over the past 5 years. It also shows that the funds are directed to low-risk income funds (black).
Source: Morningstar | Coronation Research
This is a good example of how emotions and uncertainty can drive the market. Investor behaviour is powerful and does not always behave the way textbooks tell us to behave. So, be careful not to get caught up in the emotion by reacting like other investors. Step back and consider your options.
We consume a mind-boggling amount of information daily. Most of it is consumed digitally via our phones, tablets, and computers. We typically skim or scan through it, forcing our brains to process information much quicker. But at what cost? How is this method of processing affecting our memories, attention span and ability to think? Is it better to read digitally or in print?
In this podcast, Maryanne Wolf, a researcher, and scholar at UCLA’s School of Education and Information Studies explores the relationship between the reading process and the brain's neuroscience. Wolf believes that this information overload is seriously affecting our ability to read deeply, and she shares some recommendations on how we can protect ourselves against digital distractions.
I have noticed that my ability to remember what I read seems to be diminishing. December is always a time for me to catch up on reading. Having listened to this podcast, I’ve realised that I don’t always take the time to enjoy my reading. Reading is for me an escape or a time to learn and think. I’m hoping to slow down this holiday and savour each page of my next book, something I have been neglecting this year. What do you plan on reading this holiday?
For the past decade, scientists have been researching the benefits of the complex and mysterious emotion, known as awe. Some of my favourite goosebumps and jaw-dropping moments include the birth of my children, seeing the ancient city of Petra, sitting quietly with a gorilla family in the forests of Uganda and watching a pack of wild dogs hunt. This emotion creates a burst of euphoria, which causes mind-blowing advantages according to a 2018 white paper by the John Templeton Foundation and the Greater Good Science Centre at UC Berkeley.
The findings suggest that awe-fuelled experiences might:
- Boost your mood
- Decrease materialism
- Increase humility and life satisfaction
- Aid in developing critical thinking skills
- Offer a greater sense of time
- Improve overall health
By becoming less attuned to ourselves and more attuned to the rest of the world, awe helps us re-contextualize ourselves, according to Paul Piff, associate professor of psychological science at the University of California at Irvine. He notes that “It helps make you feel like there’s more going on in the world than just you. And it gives you that sense of being a part of something much bigger than yourself.”
Piff suggests that you don’t have to climb Table Mountain every week to experience awe - it’s possible to elicit awe in everyday settings. Awe can be experienced through nature, music, or viewing something giant or minuscule. Children are also most likely to experience awe. Living vicariously through them can help you see the world differently. Most importantly though, you must stop, pause and be present.
When last have you experienced a goosebump moment?
Here are a few pieces of research and articles for those interested in learning about the studies of awe.
Why do we feel awe?
The awesome power of awe: How this neglected emotion can change lives
Eight reasons why awe makes your life better
It’s December, my birthday month, so it is only fitting to share a bubbly wine with you. The tradition of celebrating with champagne goes back to the late 1700s. Royalty loved the novelty of sparkling wine. It was believed that sparkling wine had “positive effects on a woman’s beauty and a man’s wit”.
Times have changed and sparkling wines have become easy everyday drinking wines. However, I still like the tradition of celebrating with sparkling wine.
This month, I share a slightly different version, namely a Prosecco. Prosecco comes from Italy. It’s made more affordably and therefore Prosecco’s are cheaper than Champagne.
Prosecco tends to have boisterous fruit and flower aromas and can be a little sweeter than Champagne or Brut MCC. I love it for the summer months and recommend trying any version you can get your hands on. I particularly enjoy:
Baglietti Prosecco No 7. Rose
Prosecco Valdo Paradise
I hope you enjoyed this month’s edition. Wishing you all a restful and joyful holiday.
 Price-earnings ratio is the ratio for valuing a company that measures its current share price relative to its per-share earnings.