Allaying investor concerns in
Growth Investments General Manager David Curmi speaks
to David Lindsay about todays investor sentiment and the steps
Growth is taking to keep investors better informed about their investments
In light of todays difficult equity investment climate,
Growth Investments - a wholly-owned subsidiary of Middlesea Valletta
Life Insurance and Maltese representatives for world-leading Fidelity
Investments - recently embarked on an ambitious Speaking from
Experience educational campaign. Interestingly, the campaign is
not aimed at investors, but instead at those who provide investors with
The campaign, which has been running for some two weeks now, is not
about the management of investments, but the management of investors
and their emotions and attitudes toward what are perceived as
declining markets and investing in uncertain times.
The programme was developed in response to continuing difficult market
conditions and increasingly negative investor and advisor sentiment.
For advisors, the programme aims at a deeper understanding of investor
behaviour by examining typical client scenarios that advisors are likely
to encounter in volatile markets. The programmes materials draw
upon the work of investor psychologists to demonstrate how advisors
can use their understanding of investor psychology to effectively address
The programme covers topics such as Understanding investor behaviour
in uncertain markets; Understanding risk and reassessing
expectations; The benefits of diversification; The
benefits of staying invested; Seeing the opportunity in
volatility; The value of active management; and Putting
market declines into perspective.
"Fidelity has dug deep into the way the human brain works when
it is under such conditions and has come up with this campaign aimed
at helping investment consultants when they are faced with uncertain
investors," explains Growth Investments General Manager David Curmi.
"Todays market conditions were the driving force behind our
decision to launch this campaign. In Malta we have experienced a substantial
reduction of unit linked [insurance products linked to an investment
Although Growth Investments is the sole representative for Fidelity
Investments in Malta and retails their funds to private investors, Growth
also acts as a back office services company for Middlesea Valletta Life
with respect to its unit-linked products, which are in turn linked to
Fidelity Investment funds. As such, the potential investor has two choices
involving Fidelity: either they go to Growth to invest in Fidelitys
stand alone investment products, or they go to MSV and invest through
its unit linked insurance and retirement funds, and effectively have
that policy linked to Fidelity.
Curmi continues, "This decline in unit linked business is not particular
to Malta. In fact, the same trend has been noted in both France and
Italy and it has become obvious that something had to be done to address
"Many people have become less and less inclined to invest in these
types of products following the downturn in equities on various stock
exchanges around the world, which has shied people away from these types
Indeed, the wary investor has had a lot to be concerned about of late,
with the bursting of the technology bubble, followed by the events of
11 September, further declines in technology stocks and then the Enron
and Worldcom scandals.
Curmi believes the latter accounting debacles damaged the investment
psyche to a greater extent than the 11 September incidents had.
He explains, "The Enron and Worldcom scandals revealed a deeper
problem than that of 11 September, which, for all intents and purposes,
can be considered a one off.
"However, the incidents of Worldcom and Enron have brought to light
a new phenomenon of doubting the integrity of the people who were managing
listed companies and, consequently, the way in which these companies
are managed. As soon as an investor hears of a possible question mark
on a companys integrity, the consequences are enormous.
"We suffered from these occurrences and, like everyone else, people
came to us to redeem their policies. But the fact remains that selling
investments when they are at a low is not the right thing to do. It
is difficult to try and persuade someone to hold on to their investment
while they watch it depreciate.
"I think the problem with Maltese investors is that they tend to
look to the very short term. They invest, they enjoy watching their
investment going up, but they panic when they see it going down. This
is coupled by the fact that the main determinants in investors
decisions are their instinct, word of mouth among friends and what they
hear in the media.
"However, what Fidelity has been saying is that in current times
the best investors are actually doing nothing at all. They are holding
out, standing up to the pressures to sell and are disciplined."
Curmi is adamant that the infamous stock market downturns of late must
be seen in a historical perspective in order to realise the full extent
of their decisions.
"We very much believe that the best way to regain investor confidence
is by showing investors the facts and figures to back up what we are
saying, which is exactly what we are doing though this campaign.
"So far we have had a very positive response to the campaign. Although
I think the Maltese investor is still motivated too much by instinct,
I believe we can help to alter this state of affairs by means of the
material we are distributing, which places matters in a historical perspective."
The message being, correctly, conveyed is that over the course of last
century, each major global crisis was coupled by a large jump in share
prices. And as such, it is recommended that investors hold their ground
despite the way things may look at certain times.
Fidelitys figures, being supplied to investment advisors by Growth
as an integral part of its educational campaign, show that 79 per cent
of investors holding on to their investments for just one year made
money, 86 per cent of those holding out for three years saw profits,
97 per cent after five years, while 100 per cent of those holding on
for 10 years saw profits. The figures also show that, over the long
term, equities have out performed bonds and cash many times over.
The clear message is that equity investors should stay invested until
they are ready to cash their investment in for good.
"Fidelity is constantly providing advice and we, as their representatives
in Malta, have been doing this as well. We have also been trying to
create an equity culture in Malta, which is very much needed
and this means that we need to start educating people, possibly from
a young age, what it means to invest in equities and the stock market.
"This is a time when people need to go back to their advisors.
Just because someone had a bad experience, it doesnt mean the
best course of action is to begin acting on his own behalf. I ask Mr
Curmi what he believes is the best way to spread an investment around,
to avoid keeping all your eggs in one basket.
"There is no single answer to how to best spread your investment,"
he explains, "it depends on what your objective is. Are you investing
money so you can buy property, a boat or a car in six months time,
or are you investing so that in 20 years time you can cash in
"People who want to see short term results should not even consider
going into equities or funds. We are advocating equities as a long term
investment. And despite the downturns and declining markets we have
seen lately, we still believe there are a lot of opportunities to be