Humility and patience when investing
It is extremely cumbersome to quantify the value of money in a person's life. It is an even greater task to compare the relative importance people give to money. That is because it is all relative. We all live different lifestyles. Have different hobbies, preferences and priorities. And let's face it, in today's world it is hard not to think about living without money.
Throughout people's lives, there are generally three main ways how people manage to get hold of money. Either (1) through inheritance, or (2) through hard earned salaries (or pensions after retirement age), or (3) through profits via successful investing, be it in the form of real estate investing, through the purchase and sale of bonds and/or shares or any investment product, or via profits generated by company owners.
Money is a necessity nowadays and is required to finance our day-to-day lifestyles, our working capital you can call it, as well as for the planning of our futures as well as for generations to come after our time. Net spenders are those who consistently spend more than they earn whilst net savers are those who have managed to accumulate wealth over time by spending less than what they earn, and putting money aside either for investing or for contingencies.
For those not familiar with the investment world, its mechanics and what it really entails, one might find it kind of daunting to actually take the plunge by trusting people to manage their hard fought savings. Rightly so. But in my opinion, prospective investors ought to take the necessary steps and have the right frame of mind before going down the route of investing.
Education. I have stated it many a times in my publications that investor education is key for understanding the fundamental concept behind the risk reward trade off. Invest in buying basic textbooks on key investment concepts will come a long way in ensuring investors have the necessary basics to be able to understand what is being said in a conversation with their investment advisors. But not only educating one’s self about the technical, operational and mechanical but also familiarising with the outside forces which effect the ever dynamic world of investments. Keeping abreast with current affairs, such as global politics, global news, reading about central bank activity, interest rates, and company profits via countless articles or global investment portals on the web. The information is out there for all to digest, and most of it is for free.
Humility and Patience. Investors need to acknowledge their limitations. It is a common trait the most experienced investors have. Be flexible in your thoughts. Ask for opinions. Be humble and trust the people who have the knowledge and expertise give you the necessary guidance tailored to your needs. This doesn't mean closing an eye to everything as investor initiative is also important. But when investments don’t go as planned, psychology comes into play big time, and patience as well as the ability to think and act in a rational way when things are getting bumpier than expected will come a long way in ensuring that investors maximise the potential from taking investment decisions. Refrain from being impulsive, be patient, let an investment run its course. It needs to be exposed to the investment and economic cycle. Quick bucks can be made true, but not consistently, so investors need to have a medium to long term investment horizon and not expect riskless money to be made in a short period of time.
Investors can get greedy at times...but will not go there for now, will leave that to another educational piece.
Disclaimer: This article was issued by Mark Vella, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt .The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.