Four Secrets to Successful InvestingSubmitted by HearthStone | Private Wealth Management on August 18th, 2015
APRIL 13, 2015
Four Secrets to Successful Investing
Fewer things unnerve attentive investors more than trying to make sense of their investments and the markets. The markets were particularly vexing in 2014. Large U.S. stocks did well, small U.S. stocks treaded water, and international stocks and bonds fared poorly.
So let’s begin 2015 by reviewing the secrets to successful investing. These insights have been developed over the more than 30 years I’ve been helping people with their financial matters. Once you understand these secrets, it might free you up to focus on more productive pursuits.
- No one can see the future. Sure, every now and then someone gets lucky with a market forecast or prediction. Yet no one has proved to be consistently accurate in all the aspects of a correct prediction, including the timing, direction and magnitude. Abandoning the idea that you have to have a crystal ball to be a successful investor is very liberating – you don’t have to hold on to the hope that someone can do the impossible.
- The news of the day is not your friend. Many people are caught up in whatever the news media is touting. Don’t confuse entertainment with advice. Bad news sells. And the media is in the advertising sales business. Since you’re investing for your lifetime, what happens today in the world or in the markets is temporary. If you let go of the noise and distractions, you can free yourself to focus on more meaningful things in your daily life.
- Market downturns are common – even normal. Stay calm and don’t worry about market dips. The traditional definition of a market correction is when major indexes drop between 10-20%. The mere fact that we haven’t seen one of these dips in a while doesn’t mean that the trends have changed. Understand that we’ve prepared for them in advance, and will take advantage of any opportunities that might present themselves. Embrace the volatility. Free yourself to pay attention to other things.
- Putting all your eggs in one basket is a risky strategy – too risky for most people. The world of investments is broad and diverse. There are large and small companies, domestic and foreign investments, stocks and bonds, and more. A broadly diversified portfolio will be designed to capture the potential benefits of global economic expansion over time. Such a portfolio will also always have something that is doing poorly at the moment. And, the aggregate results will not be as good as the best investment in the portfolio. That’s just the way it is. Ask yourself: “Do I want my investment strategy to make me wealthy, or keep me wealthy?” I believe the wise choice is the latter and will continue to advise accordingly.
Successful investing is both an art and science. And, it’s often more about avoiding bad decisions than requiring consistently accurate ones. So, understand these secrets, give yourself the freedom to enjoy every day of 2015 and beyond!