There are a few things to consider. To begin, determine why the majority of investors fail, or at the very least, receive smaller returns than projected. It’s not for the reasons you’d think. The most common explanation is a lack of expertise in most fields.
It’s not for the reasons you’d think. The most common explanation is a lack of expertise in most fields.
They even outperform top money managers and those with PHDs in portfolio construction theory. The reason is straightforward. The dead aren’t watching CNBC or worrying about the current market turbulence (elections and covid in 2020, Russia and Ukraine this year).
They don’t panic when markets crash, and they don’t try to forecast the next one. They also don’t let bias influence their investment decisions.
This isn’t an unusual occurrence. I’m at a loss for words as to how many folks have informed me that their best-performing accounts were the ones they forgot about.
They were usually modest accounts put up by their parents, or accounts from which they withdrew 90% of the money decades ago and maintained a small balance.
They were pleasantly surprised when they looked at the values after decades of forgetting about them, and those accounts usually did the best.
The lesson is that being more active does not guarantee better results. In fact, the more you think about something, the more likely you are to overthink it and lose out.
The best investors just
- Invest now, rather than waiting for the ideal opportunity to invest in the markets.
- Emotions must be managed. Either they employ advisors or they learn to manage their emotions. This appears straightforward at first, but it becomes more difficult the longer you invest because events like 2008 and 2020 will occur on a regular basis.
- Maintain a well-diversified portfolio, particularly as people grow older.
- Keep dividend-paying items in your portfolio and reinvest the dividends.
- Don’t just jump on the latest craze.
Investing, in general, is a case where simplicity triumphs over complexity. When it comes to considerations, the best thing to do is to match your life goals to your investment strategy.
If you want to achieve a specific goal, such as early retirement, this provides you with something to strive for.
