To be a good investor, add these insights to your mental quiver of wisdom.…

  • There is no need to trade within your portfolio as a normal course of events. Buying and selling investments is the way everyone portrays the investing world. Movies, TV, internet, radio, publications, you name it. Buy low, sell high, watch the markets, time the markets, what’s the latest trend, what sectors are up or down, what’s the next hot stock tip… It’s exhausting trying to keep up. Relax. You can stop trying to keep up because trading is unnecessary and a losing proposition over time.
  • The trading mentality leads people to think investing is a short-term game but it’s not. Short-term means you have to be ready to pounce when opportunity knocks. How do we know when opportunity knocks? We don’t. Investing is actually a long-term game. It’s based on a lifetime of work, having a plan, being thrifty, patient and disciplined. There are no shortcuts or get-rich-quick schemes.
  • The knowledge and processes required behind success in investing are not that complicated. The financial service firms and media would have to believe it is because they need you to think that. Successful investing does not have to be complicated. In fact, the more complicated investing gets the greater likelihood that you will fail. Find articles on this site about averaging down, portfolio allocation and rebalancing to build a strong base of knowledge and start an action plan. A good adviser can help build a solid a plan for you and help maintain your discipline when you feel emotionally weak in the knees.
  • You can’t always stick with a good fund manager. This would be great but good fund managers eventually leave or retire. Some are great during a period but their strategy falters when the environment changes. You can’t count on their replacements keeping the same success level. Some management oversight on your part is always required to ensure your original game plan is still on track.
  • Most financial advisers are sales people not advisers. Real advisers have no agenda and no specific products ready to pitch when you walk in. Real advisors can’t begin to know a strategy or investments until they get to know you; your current situation, your needs, your desires and your objectives. Real advisers don’t have their organization pushing them to pitch preferred products. Most people need simple, efficient, and effective financial plans. When the product/solution gets complicated, it gets expensive and probably not what you need. If you can’t fully understand the strategy and the product, you have reason to question the help and possibly walk away. Generally, if you need insurance, get insurance; savings get savings; investments get investments. Combining all in one product, be on guard.
  • The markets are not stacked against us. People whose strategy is based on speculation or “playing” the markets or flying by the seat of their pants may think so. It’s their misguided strategy dragging them down; not a rigged market. A person whose strategy is based on long-term market history and discipline in their actions will succeed with no problem.
  • The world and political stages are not causing your investments to fail. These worldly and political events have always been around. Look around. We’re still here and better than ever for the most part. Investing is about understanding that people instinctually want freedom and to be better than they were the day before. Knowledge and wisdom don’t happen overnight in the world’s societies. In the long term things work out.
  • Your plan should expect ups and downs in the short terms because ups and downs are guaranteed. How many guarantees do you get in investments? If you know ups and downs will happen, your strategy has to exploit those ups and downs for your benefit. You don’t need to know when we are up or down to be successful only that ups and downs are a natural state of affairs in investing. Plan accordingly.

Source:  Shane Ostrom, CFP