Building Financial Acumen: Moving Away From a Scarcity Mindset with Shayne Sommer

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Focusing on building financial acumen involves analysing our understanding of our current financial position and looking for ways to improve, refine and enhance not only our knowledge but also our behaviours relating to financial matters.
Uncertainty around financial affairs can come from a ‘scarcity mindset’ – a feeling that if others are achieving high returns in their investments, that there will be ‘less available’ for everyone else.

You may have encountered a scene similar to this:

While attending a social gathering someone is talking about an investment they held that provided a significant return for them in the last year or so; this discussion can elicit a ‘fear of missing out’ in others that they didn’t get that significant return, and whatever they did receive is ‘less’ not only in monetary value but it also means they weren’t clever or fortunate enough to be involved in that lucrative investment the person is talking about.

Let’s re-frame this one.

Any investment that is going to provide a high return, is very much likely to involve a high risk of it not providing that high return. Risk and return in investing are related. There is every chance that lucrative investment came with a hefty risk of not paying off for the investor, but they are probably not likely to include that in the conversation, or furthermore, start their next conversation with the alternative story – “I took a big risk this year and it didn’t pay off.”

Let’s change the perspective on this one. Look up the term deposit or high-interest savings account rates on offer by banks at the moment – circa 5% p.a. interest is available on cash deposits presently (ratecity.com.au) – consider if there is a limit to how many investors the banks will allow to open an account and generate that 5% p.a. income – how many customers do you think the banks are offering that rate to? 
(note – these are advertised on many of their websites, not an exclusive offer). 

Essentially, if you have some funds that can be put into cash savings, you can generate 5% p.a. on those savings – so much for scarcity of return.

Taking that further – if you are investing in a managed fund or ETF that follows a share index (such as the ASX 300, the top 300 listed companies in Australia), and the Australian market achieves circa 7% p.a. return for a year – it is likely your investment will provide you around that rate of return too (it may be reduced due to some fees and the timing of your investment).

Investing in a ‘growth’ asset such as the above will involve risk, and the balance of the investment will fluctuate with the market – however, there is return available to everyone who holds these investments.

Someone else’s ability to generate return from their holdings is not going to reduce the amount of return available to anyone else – what will impact return is the type of assets invested in, and how often the mix of investment holdings is amended– let’s cover that another time.

Until then, reach out if you’d like to build your financial acumen with a 30-minute session related to your own individual position and any questions you’d like to pose.

Important note – when it comes to investing in growth assets, consider only investing monies that are:

  • not needed immediately
  • funds with a long time horizon (amount of time before we can access or need to utilise)

About Shayne Sommer:

Shayne likes to e

Private Wealth Adviser at Shadforth Financial

Included in Financial Standards’ Power50 for 2023, and awarded Financial Adviser of the Year by Women in finance awards in 2022.

Certified Financial Planner

Contributes to the FAAA’s Certified Financial Planner education program, and Graduate Diploma in Financial Planning subjects with Kaplan Professional

Hold a second dan black belt in karate, and currently a student of Korean martial art, Hapkido.

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