Christopher
Johnson:
Welcome
to
Morningstar.
Today
I’m
joined
in
the
studio
by
Mike
Coop,
the
CIO
EMEA
of
Morningstar
Investment
Management.
Mike,
thank
you
so
much
for
being
here
with
me.
Mike
Coop:
Chris,
my
pleasure.
CJ:
So,
we’re
here
to
talk
about
the
market
sell-off.
So,
what
drove
it,
in
your
opinion?
MC:
Well,
it’s
normal
to
have
bouts
of
volatility,
especially
in
markets
that
have
risen
sharply
and
become
very
popular.
And
you
can
see
that
this
year,
AI-themed
investments
fall
into
that.
So,
in
some
ways
it’s
hardly
a
surprise
that
at
some
point
after
lofty
expectations,
we’d
always
realize
that
you
saw
some
rotation.
And
so
some
of
those
stocks
have
fallen
pretty
heavily.
So
that’s
one
of
the
factors.
We
have
had
quite
a
bit
of
volatility
in
Japan,
which
has
some
of
those
same
features
that
became
quite
popular.
And
at
the
same
time,
we’ve
had
some
shifts
in
interest
rates.
So,
we’ve
had
interest
rates
that
were
cut
in
the
UK,
in
Europe,
and
in
Japan
they’ve
gone
the
other
way.
And
the
central
bank,
I
did
think
it
caught
some
of
us
off-guard
with
that.
So
those
were
some
of
the
factors
behind
it,
but
it’s
not
really
all
that
abnormal
what
happened.
You
do
get
bouts
of
volatility
and
so
it’s
been
a
while
since
we’ve
seen
one.
CJ:
So,
there
was
a
lot
of
panic
in
the
market.
So
how
should
investors
act
when
dealing
with
such
acute
volatility?
What
would
you
say
to
them?
MC:
So,
it
pays
just
to
take
a
step
back
and
remember
why
people
are
investing.
They’re
investing
to
meet
their
personal
goals,
whether
it’s
saving
for
retirement
or
to
fund
their
accommodation,
or
maybe
their
education,
or
even
something
like
a
car
or
a
holiday,
whatever
it
is.
So,
the
goal
is
to
achieve
a
certain
amount
and
so
when
markets
go
up
or
down,
it
doesn’t
change
the
need
you
have
to
have
money
and
the
goals
that
you
have.
So,
it’s
better
to
really
focus
on
how
you
are
tracking
compared
to
your
goals
rather
than
just
the
ups
and
downs
of
markets,
which
will
do
their
thing,
but
that’s
factored
into
your
long-term
investment
strategy
that’s
been
designed
to
help
you
reach
this
goal.
So,
sticking
to
your
strategy
is
what
matters
and
accepting
that
volatility
is
part
of
the
investing
journey.
If
you’re
going
to
get
a
return
that’s
higher
than
cash,
then
you’re
going
to
have
to
accept
some
variability
and
return
in
the
short
term.
CJ:
And
what
are
the
behavioral
traps
that
crop
up
when
there
is
this
panic
that
enters
the
market,
do
you
say?
MC:
So,
these
things
all
occur
because
we’re
dealing
with
the
future
and
the
future
is
uncertain
and
so
we
can
quickly
find
ourselves
changing
our
minds
about
what
the
future
might
look
like.
This
is
what
makes
investing
different
from
going
and
buying
a
hamburger.
When
you
buy
a
hamburger
you
know
exactly
what
you’re
getting
there
it
is
in
front
of
you,
you
eat
it,
you’re
going
to
endure
that
experience.
Whereas
when
you’re
buying
investments
it’s
about
what
might
happen
in
the
future
and
the
less
certainty
around
that.
So,
we
have
a
couple
of
behavioral
traits
that
come
to
the
fore
here.
One
of
those
is
as
we
think
about
the
future,
we
tend
to
over
emphasize
what’s
just
happened
recently
to
us.
In
the
jargon
this
is
referred
to
as
confirmation
bias
and
so
if
we’ve
been
through
a
particularly
memorable
experience
or
an
economic
situation
or
a
market
situation
we
act
as
if
that’s
highly
likely
to
continue
and
we
over
emphasize
a
likelihood
of
it.
So,
we
tend
to
expect
extremes
to
continue
when
we
know
that
by
their
nature
extremes
don’t
continue.
So,
we
tend
to
get
caught
up
in
the
moment
and
become
too
optimistic
or
too
pessimistic.
So
those
attributes
plus
we
tend
to
seek
information
that
validates
our
existing
view.
There’s
confirmation
bias
and
of
course
this
is
exaggerated
with
social
media
where
we
tend
to
be
grouped
with
others
of
a
like
mind.
So,
we
tend
to
be
overconfident
in
our
view
about
what
might
happen
and
be
less
aware
of
other
perspectives
and
so
that
tends
to
mean
that
we
make
bad
decisions
when
you
get
these
more
extreme
shifts
in
markets
and
conditions
and
this
is
borne
out
by
Morningstar’s
own
research
on
study
of
the
impact
of
those
timing
decisions.
So,
mind
the
gap
research
which
shows
that
your
returns
are
lower
when
you
take
into
account
people’s
timing
decisions
then
you’d
otherwise
get
just
by
staying
put.
So
that
tends
to
be
what
happens.
Those
are
the
traps
that
you
can
easily
fall
into.
CJ:
And
to
what
extent
does
a
herd
mentality
impact
investment
behavior
and
can
it
be
a
good
thing?
MC:
So,
I
think
in
these
situations,
and
this
is
where
investing
is
a
bit
different
from
other
forms
of
human
activity
and
choice.
So,
if
you
want
to
find
a
good
restaurant
walking
down
the
road
seeing
the
ones
that
lots
of
people
are
in
is
often
a
pretty
reliable
sign
that
there
must
be
something
good
going
on
there,
relative
to
the
ones
where
there’s
nobody
there
at
all.
But
with
investing
the
things
become
very
popular.
What
happens
is
people
are
forming
these
expectations
and
they’re
buying
and
pushing
up
the
price
based
on
these
very
optimistic
expectations.
And
whilst
those
optimistic
expectations
could
occur
more
often
than
not
if
they
get
too
optimistic
it’s
quite
hard
to
meet
them.
So,
you
end
up
with
disappointment
and
when
you
end
up
with
disappointment
and
people
are
already
owning
a
lot
of
something
then
that
tends
to
lead
to
a
sharp
fall
in
the
price
of
those
assets
as
they
decide
to
own
less,
and
they
adjust
their
expectations
downwards.
So,
our
whole
investment
approach
for
our
clients
is
to
do
the
fundamental
research,
identify
how
much
you
would
pay
in
most
circumstances
to
own
an
asset,
understand
whether
assumptions
that
investors
are
making
it
too
optimistic
or
pessimistic
and
those
create
opportunities
that
you
can
exploit.
So,
it
goes
back
to
the
start
of
this
conversation
which
is
having
a
long-term
investment
plan
sticking
to
it.
What
you
can
as
an
investor
do
is
at
the
very
least
rebalance
your
portfolio
back
to
target
when
market
movements
are
big.
Over
time
that
adds
value
because
typically
you’ll
be
buying
things
that
have
sold
off
too
much
and
you’ll
be
selling
things
that
have
probably
gone
up
too
much.
So
that’s
typically
how
we
operate
as
well
as
making
sure
that
you
are
not
falling
into
this
trap
of
getting
carried
away
with
things
when
they’ve
gone
up
a
lot
and
people
are
very
optimistic.
So,
while
valuation
driven
approach
is
designed
to
alert
us
to
those
situations.
You
still
got
to
do
your
homework
and
if
you’re
not
able
to
do
it
then
people
like
Morningstar
can
help
do
that
for
you
and
create
the
portfolios
but
that’s
the
key
really
is
having
that
foundation,
the
discipline
of
rebalancing
and
sticking
to
your
investment
strategy
and
not
succumbing
to
a
lemming
like
behavior
when
you’re
seeing
extreme
headlines
because
that’s
just
the
ups
and
downs
of
markets
are
a
feature
of
investing
and
it’s
a
little
bit
like
what
used
to
be
the
case
when
you’d
have
a
once
or
twice
a
year
sale
in
department
stores
and
shops.
And
so
investment
markets
give
you
that
similar
opportunity
when
people
start
to
panic
and
assume
the
worst
is
here
and
that
often
by
keeping
a
cool
head
you
get
the
opportunity
to
buy
things
at
a
much
better
price
than
you’d
normally
be
able
to
do
it.
So,
these
things
are
actually
great
opportunities.
It’s
that
analogy
that
you
hear
Warren
Buffett
reference
to
and
Ben
Graham,
Mr.
Market
and
getting
excessively
optimistic
or
pessimistic
because
those
are
opportunities
that
can
present
themselves
to
pick
things
up
from
time
to
time.
But
the
main
thing
is
to
stick
with
your
investment
strategy
and
not
be
knocked
off
course
because
it’s
very
hard
to
add
value
with
any
kind
of
market
timing.
You’re
better
off
just
sticking
to
your
investment
strategy.
CJ:
Mike,
thank
you
so
much
for
taking
the
time
out
to
speak
to
me.
MC:
Thank
you,
Christopher.
CJ:
This
is
Christopher
Johnson
from
Morningstar
UK.
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