This article originally published in The Northern Daily Leader on 3 March 2012.

The human memory is an intriguing phenomenon. I’m always amazed that I can remember an off-hand comment from over twenty years ago, yet I can still forget someone’s name two minutes after being introduced to them. A while ago I decided to make an effort to improve my memory and bought a book which promised to teach me all the secret techniques to boosting your memory, but I’ve forgotten where I put it after I brought it home, which wasn’t much of a help.

It’s also remarkable how sights, sounds and smells can jog our memories, instantly reminding us of places or events long past. Music in particular is very effective at transporting you back to a certain time or place. When I hear Ennio Morricone’s classic theme song from The Good, the Bad and the Ugly, it immediately takes me back to the late 70’s, sitting on the shagpile rug on the lounge floor while my parents listened to the soundtrack on their vinyl record player, eating Swedish meatballs and a cheese fondue. On the other hand, a power love ballad from Whitney Houston reminds me of teenage parties where we hung out with our acid wash jeans, leather jackets and big hair, furtively sneaking sips from a can of beer we’d stolen from Dad’s fridge.

It probably comes as no surprise to hear that music in particular affects not only our memory, but also our mood. However it is surprising that music can affect our willingness to take risks, particularly with regards to gambling or investing. Recently researchers in Sweden conducted a study where they measured the willingness of participants to take financial risks while listening to either their favourite music, music they disliked or no music at all. They found that while listening to music we like, we’re likely to be more aggressive than usual in taking on risk – in the experiment the participants were prepared to bet above average amounts on wagers, despite their chances of winning being no higher. Conversely however, the study showed that while listening to music we dislike, we’re far more cautious and less willing to make gambles or bets.

It’s not hard to apply the findings of the study to the investment world – you might find yourself sitting at home listening to your favourite album, just checking out your online broking account, when the urge takes you to invest all your money in some fly-by-night, speculative mining exploration company. My advice is to step away from the computer, put on a heavy metal album and wait for the urge to pass. The financial savings could be well worth the resulting headache.

This article originally published in The Northen Daily Leader on 18 February 2012.

When it was announced, a few years ago, that aspiring immigrants to Australia would have to pass a quiz on Australian history and culture in order to be allowed to settle here, there was both agreement and condemnation. Some people complained that not knowing our national flower (the Golden Wattle) was hardly sufficient grounds to be rejected as a potential Australian, while others thought it was only fair that every Australian knew Don Bradman’s highest test score (334 for all you bad Australians out there).

Instead of just multiple choice, perhaps the test should have incorporated a more hands-on element. It would have been more interesting if the would-be Australians were taken to the racetrack on a Saturday afternoon and asked to pick the winner of race 6 at Rosehill. Pick the winning horse and you’re in, get it wrong and you might have to settle for a life in New Zealand. Really, if you can’t pick a winner at the track and you don’t love to gamble, then you might have trouble fitting in, for nobody loves gambling more than Australians do. We spend more than $20 billion a year on gambling, making us the biggest gamblers (and losers) in the world on an individual basis.

Most of us, at one time or another, have gambled, even if it’s just the annual $5 down-the-drain on the Melbourne Cup. Others take it more seriously. A friend, lets call him ‘Dave’, has perfected the art of hanging around the gents toilets at the racetrack, where he’s learned that a casual conversation often rewards itself with a winning tip or two. Like a know-it-all at a pub trivia night, sometimes we just can’t help showing off, even if it means enriching that strange guy who hangs around the toilets a bit too often.

People often lump gambling and the stock market together, believing that the risks or chances of success in both are of equal magnitude. In fact researchers have found that there is a difference: gambling in casinos or on pokies means you will only ever lose in the long run, due to the nature of the odds against you. The stock market however, is more like the racetrack, where the more informed investor (or punter) can succeed at the expense of less well informed players. The message is that successful investing, like picking winners at the track, means talking to somebody who knows what they’re doing. It’s just that good investment advisers are hopefully easier to find than hanging around the toilets at the racetrack.

This article originally published in The Northern Daily Leader on 4 February 2012.

I’m never quite sure what I’m meant to do on Australia Day, besides throw some meat on the barbie (lamb of course) and have a few beers. On the most recent Australia Day however, even that ritual didn’t occur, as rainy and cloudy weather kept most of us in the Tamworth area indoors. Instead, I found myself at the video store, looking for a movie to watch while it rained outside.

Everybody knows that choosing a movie from the store can be a daunting experience, especially when you’re choosing a movie to watch with other people who aren’t there to offer their opinion. In this case my wife had stayed at home, while I was given the unenviable responsibility of choosing the movie. Eventually I narrowed the choice down to two: in one hand I held The Hangover Part II, and in the other was Sex in the City: The Movie. You can clearly see the dilemma which confronted me – a choice between a good bloke’s movie or a girly story about shopping and relationships.

It struck me then that choosing a movie was not unlike investing in the stock market – I had a choice between very different alternatives, just as you do when you select any investment. One of the choices, The Hangover, was clearly high-risk (my wife was not going to be happy when I showed her my selection) but also high-reward (I was going to be much happier watching it than the movie about shopping). Sex in the City however, was the complete opposite – low-risk (my wife was going to be thrilled with my choice) but also low-reward (I would have to try and keep awake for two hours watching Carrie and her friends go shopping and talk about their feelings).

Each time you invest money in the stock market, or indeed in any investment, even a bank account, you face a trade-off between high-risk, high-reward and low-risk, low-reward. Problems arise however when we fail to correctly identify and price the true risk of an investment, believing it to be low-risk when in fact it is the opposite. It’s a bit like not reading the back of the DVD box and accidentally taking home a low-budget erotic movie filmed in Eastern Europe – do not expect a favourable response from your wife. In the end, my survival (and investing) instincts came to the fore, and my wife was able to enjoy her movie about shopping while I went outside and dug some holes in the garden. When it’s an investment for life, sometimes you’ve just got to stay focused on the long-term.

This article originally published in The Northern Daily Leader on 21 January 2012.

It’s funny how easily we can misjudge someone, leaping to conclusions without any reasonable basis. Many years ago my Year 4 teacher told my parents that I had a talent for music and urged them to continue with my musical education. I can only think my teacher was confusing me with someone else, or that he was too fond of the odd drink, as my singing bears an uncanny resemblance to a stretched fan belt and I couldn’t pick a tune even if it was standing next to me holding a neon sign.

Despite my complete lack of musical talent, I do admire those with the musical skills and the courage needed to keep a crowd entertained. Being able to play a musical instrument can also come in handy. During a holiday to India some years ago, a power failure knocked out the lights and music at the restaurant at which my wife and I were eating. The restaurant owner came over with a set of bongo drums and asked me if I could play the drums and would I mind providing some entertainment for the other restaurant patrons? For a moment I felt like telling him that of course I could play, grabbing the drums and setting off on an uncontrolled, utterly clueless bongo drum jam session. I wondered if he would be too polite to come up to me and tell me that I clearly had no idea how to play the drums, or perhaps he would think it was some new Australian-style bongo drum technique of which he had never previously heard?

The importance of music to the local Tamworth community will be highlighted over the coming weeks as the Country Music Festival swings into high gear. While some Tamworthians may grumble about the crowds, noise and inconvenience, it’s worth remembering that the festival brings a reported $40 million into the local economy each year. Based on a population of around 47,000, that amounts to around $850 for every man, woman and child living in Tamworth. Now obviously that money doesn’t end up directly in your pocket, but all of us in the region benefit through the increased revenue for local businesses, the temporary and full-time jobs created by the activities and services associated with the festival, and the investment in the infrastructure required to host the festival. As for me, don’t expect to ever find me busking on Peel Street during the festival – most people rightly think that the sound of two cats fighting does not qualify as music.

This article originally published in The Northern Daily Leader on 24 December 2011.

I feel very lucky to be living in the twenty-first century, rather than say, 2.5 million years ago. At that point in time (the Palaeolithic era), humans were still very primitive, living in small groups as hunters and gatherers, scouring the plains for any available source of food.  It was apparently during these times that we developed what I think is a somewhat useless skill – the vasovagal reflex; which is really just a fancy name for fainting. According to researchers, if combat between small bands of humans broke out, women and children protected themselves by falling to the ground and playing dead, essentially fainting. Another theory has it that we developed the ‘ability’ to faint as a way of dealing with the many hungry and deadly animals which prowled the earth in those days – if you fainted and pretended to be dead you might stand a greater chance of not being eaten (which seems a bit silly, as you would still be a tasty meal for a hungry carnivore, regardless of the fact that you had just passed out).

Whatever the reason, over the years we humans have honed our ability to faint to a fine art, even if there’s no chance of us being eaten by a T-Rex. And unfortunately I include myself in that description. It’s a shame there isn’t a World Championship of Fainting, as I’m confident I could win gold for Australia. My most recent example, prompted by a stomach complaint, would certainly have come as close to perfection as Nadia Comaneci’s 10 out of 10 on the uneven bars at the 1976 Summer Olympics. It was a fairly spectacular effort, with all the hallmarks of a great faint – sweating, shivering, mumbling and kryptonite-like weakness.

Although a small part of my brain was trying to figure out whether or not I was dying (as you do every time you faint), while my wife stood there asking me what was I doing kneeling under the dressing table at one in the morning, my real concern was that this might be something serious and it would mean we would have to cancel our upcoming overseas trip, and even worse, I hadn’t yet bought any travel insurance! (now you probably see where this is going). Cancelling the overseas flights without travel insurance would have left us significantly out of pocket. Insurance is a dull topic to discuss, but travel insurance, health insurance, life insurance, income protection insurance and of course home, car and contents insurance – you always need it the most, just when you don’t have it. Merry Christmas everyone!

This article originally published in The Northern Daily Leader on 10 December 2011.

One of the dynamics which makes Australia a wonderful place to live, is that just about all of us, in one way or another, are immigrants. Whether your ancestors came on the First Fleet or a leaky boat from Vietnam, or jumped across the ditch from NZ, we all have diverse backgrounds, lucky enough to share a bit of living space on this big island we call home. Of course, being a multicultural nation does have its perils, not least in the confusion that can be caused by differing languages or phrases. Despite having lived in Australia for over a decade, I can still confuse someone by giving them driving directions which tells them to ‘turn left at the robot and right at the traffic circle’ (translated into Australian it means turn left at the traffic lights and right at the roundabout).

I was thinking about the different names for traffic lights as I was stuck on red at Tamworth’s newest set of traffic lights (at the intersection of Bridge Street and Belmore Street). As I waited for green, I wondered why we had swapped a perfectly good roundabout for a set of traffic lights. Did you know that a new set of traffic lights can cost $160,000? Research has also shown that roundabouts are much safer than traffic lights – converting an intersection with traffic lights to a roundabout reduces the overall number of crashes by 37%, and crashes involving an injury by 75%. Most accidents at roundabouts tend to be slower-moving and are usually side-swipes. This compares to traffic lights where accidents can occur at high speed and are often right-angled collisions; more dangerous for both drivers and passengers. And if you drive along Bridge Street regularly, you may be interested to know that roundabouts reduce traveling delays by up to 74% as compared to traffic lights.

Essentially roundabouts are cheaper to install and maintain, reduce accidents and help speed up the flow of traffic. One disadvantage however is with regards to pedestrian use, which can be solved by a pedestrian crossing (with lights) a short distance from the roundabout. Applying a cost-benefit analysis to the new lights on Bridge Street shows the following: for around $160,000 we are likely to see slower traffic and more accidents with greater severity. But on the plus side pedestrians can cross the road safely. I’m no anti-pedestrianite, but I think the costs more than outweigh the benefits. But what do I know? I still call traffic lights robots and think a schooner is a type of small ship.

This article originally published in The Northern Daily Leader on 26 November 2011.

Being a parent and having total responsibility for another (small) person’s life is a daunting proposition. We all want the best for our children and it can be intimidating to realise that much of their journey through life will depend on the job you do when they are young. Raise a little monster and you might be having a future family Christmas at Long Bay jail; do it right and your little darling may let you join them aboard their private jet on the way over to Tahiti. Inspired by this thought, I recently sat down with my son Jack for his first lesson in basic principles of finance. They say you’re never too young to start learning and I was pretty sure Jack was ready. Unfortunately our first session was a disaster – Jack seems to have a very short attention span and was more interested in the TV. He also ate part of my notepad and had a little vomit on my HP business calculator. As far as productive learning experiences go, it probably ranked zero out of ten. Still, I shouldn’t be too hard on him, he’s only eleven months old and perhaps wasn’t quite ready for a discussion on the various interest rate hedging strategies used by banks.

Starting early is important not only in education, but also in saving and investing. The earlier you start saving up for something, be it a new car, a nice pair of shoes or your retirement, the more chance you have of reaching your goal. Now we all already know this, so why is it so hard to do? It’s simply a trade-off between immediate and delayed consumption. We all want it now! Having to wait a week, six months or forty years before we get to spend our savings is no good, we want it all now. Researchers have of course considered this problem, and found that our willingness to delay consumption depends on the nature of whatever it is we are saving (or paying) for. It turns out that we’re more likely to happily delay buying something if it is fleeting in nature (they strangely used a kiss from your favourite movie star as an example), but less happy to delay it if it’s more permanent (new shoes or a shiny red sports car for example). The message is that we can increase our chances of achieving our savings goals if we’re more aware of the nature of what we’re saving for. The other message that I got is that vomit and calculators really don’t mix.

This article originally published in The Northern Daily Leader on 12 November 2011.

When I was a young boy, the July school holidays usually meant a trip to the UK to visit my father, who spent half the year in Europe and the UK on the professional golf tour. The highlight of the trip (besides saying hello to dad of course) was a visit to some family friends – Mr and Mrs Young. Each year the Young’s would give me fifty pounds to spend on whatever I fancied, a lot of money back in the 1980’s. My usual approach to spending the money was to nag my parents into taking me to Hamleys toy store on Regent Street, apparently the largest toy store in the world, with seven floors of fun and adventure. I would usually be dropped off at the store in the morning and told to be outside the front door four hours later, giving me plenty of time to explore every inch of the store, with my fifty pounds burning a hole in my pocket.

And there were plenty of temptations. Should I get some more dinky cars for my collection? What about a remote-controlled truck? Or a Meccano set? Or an army of little tin soldiers? Perhaps I needed another model aeroplane to build or a character from the Masters of the Universe? Whatever you fancied, it was there, hidden somewhere in the 54,000 square foot of toys toys and more toys. Often the sheer number of toys and goodies on display would simply overwhelm me, and with the four hour deadline fast approaching, I would have just minutes to choose something….anything….and would invariably end up handing over my fifty pounds for something made of plastic and with lots of flashing lights. I’d rush home with my new toy, break it within ten minutes, and then spend the rest of the day reflecting on my sad life and the fleeting and ephemeral joy one derives from spending whole lot of money on complete rubbish.

It wasn’t until many years later that I finally figured out what I really should have been buying with my fifty pounds – shares in BHP Billiton. If I had the foresight to spend my fifty pounds on BHP shares each year, I would now be sitting on a tidy investment worth just over $23,000. A little deposit perhaps towards the fast red sports car that somebody wants for their fortieth birthday. I guess the toys never change, they just get bigger and more expensive

This article originally published in The Northern Daily Leader on 29 October 2011.

Ever wished you had done something sooner rather than later? An example of this occurs to me quite frequently. It invariably involves some form of a get-together or party, where I’m introduced to a group of new people. I don’t know how it happens, but at some point one of my new-found friends starts calling me Jason. I guess Justin and Jason are pretty similar names, so the mistake is understandable. When this happens I might interrupt them and point out their mistake, but sometimes the moment just doesn’t seem right, or out of politeness I’ll let them persist in calling me Jason – I’m fairly easy-going and if they call me Jason, Justin or Jamie, well so be it, it’s not the end of the world. Problems start arising however when my new friend starts introducing me to other people as Jason – soon half the guests think I’m Jason, the other half think I’m Justin and nobody’s sure who the other half is talking about. It’s not quite on the same scale as the Seinfeld episode where a co-worker of Elaine’s thinks her name is Susie and Elaine has to fake Susie’s death in order to clear up the confusion, but it’s close. It definitely would have been a lot easier to do something about the mistaken identity sooner rather than later.

Given my regular message that most investing behaviour is driven by our cognitive and emotional states, it probably wouldn’t surprise you to learn that the same failure to act sooner rather than later is also prevalent in how we manage our investments. Researchers have given it the fancy name of the ‘disposition effect’, but really all it means is that when it comes to share investing we tend to hold on to our losers and sell our winners. It’s not so much the selling of the winners which is a problem (as they say, nobody ever went broke taking a profit), it’s holding on to dud investments for far too long, when they should have been sold immediately when things started to go downhill. Now not every investment which falls in price needs to be sold, sometimes even the best investments fall in price for no particular reason. But when a stock you buy at $5.00 falls to $3.00 and the papers are full of stories about an inept CEO and dodgy deals, ask yourself the question – do I want to be Jason, or do I want to sell this loser and get out while I can?

This article originally published in The Northern Daily Leader on 15 October 2011.

We recently had reason to drive from Tamworth to Rockhampton and back – just over a thousand kilometres with a nine month-old baby on the back seat, plenty of time to learn every Wiggles song off by heart. Long trips can be a drag and besides endless games of I-spy or ‘twenty questions’, one way we occasionally while away the hours is a deep discussion about what we would do if we won the lottery (ok, not quite helping to advance the cause of humankind or world peace, but it can kill a few hours on the road). Would we want to buy that small farmhouse in Tuscany or the beach house at Sawtell? What about that small, red and fast sports car, or the 80 inch fl at screen TV? Shoes and clothes are also popular with certain members of our household, while I’m sure my wife wants a fully kitted-out shed and workshop.

A second dilemma is who to tell and how much to give away. Family would presumably expect to be the beneficiaries of some of your good fortune, but it’s not always a straight forward decision. Have I forgiven my sister for telling me that socks had left and right feet, and laughing when I spent ages trying to figure out which was which? What about my brother-in-law, who once confided over a few beers that he had no plans to share any lottery win which might come his way? Perhaps dealing with a windfall is not as straightforward as you would think. Unfortunately, your real chances of winning the lottery are slim – winning Powerball is a 1 in 55 million long shot. However your odds of having to deal with a windfall of a different sort are quite high – every one of us has money in superannuation and many of us will need to decide what to do with our lifetime savings when we retire. While not quite on the same scale as a lottery win, you may still be required to decide what to do with hundreds of thousands of dollars.

Don’t do what many Australians do, which is to ask their dentist, neighbour or drinking buddy at the pub for their opinion. Make sure you get professional advice from someone you like and trust. You may only have one opportunity to get it right. And Lauren, if you’re reading this,I finally figured out that nobody can see through your shoes, so it doesn’t matter if you’ve got your left and right socks mixed up.