3 Reasons why you need to have you own Investment Perspective
As much as I would have liked to written about the nice weather or the riot in London, this is still a semi-financial/investing blog, I decided to I would write about the recent activity in the financial markets and how it affects us all. I just wrote this article a few days back about the big impact the US debt had on our markets. At a time like this I really think it is important for each and every one of us to have our own perspective when investing.
What does it mean to have your own perspective? It means to have a reason as to why you are investing in general and a reason why you buy every security that you add to your portfolio. This way you know exactly why you bought something and you know when to get out of a position. This also means you know what goals you have and having the discipline to stick to the plan.
1) The Analysts can Screw with Your Mind
So you’re watching CNBC and you notice that the beautiful Maria Bartiromo is telling you how badly the market is falling with the latest news. She calls on one analyst after another getting their opinion. These guys in fancy suits that are getting paid hundreds of thousands of dollars sound like they know what they’re talking about. And they should, they probably have a MBA, CFA (Chartered Financial Analyst), and some other 3-letter acronym beside their name.
These guys have learned to talk well and convince people that they know what they’re talking about and that’s also part of the reason why they’re on TV, making the big bucks, telling us why stock xyz should be going down and why the market should be doing exactly what it’s doing. But chances are their investment portfolios aren’t doing that much better than yours.
Don’t get me wrong, I think analysts are smart people. Becoming a CFA is not an easy task and dealing with people in the investment industry (think of being with Gordon Ramsay on a bad day) is nothing easy. But just because they’re on TV does not mean you should listen to their advice. Stay your course, you’ll be happier in the long run.
2) Long Term Investing Always beats out Short Term Investing
If you think long term, you will always win. Wait this market out and the markets will recover. I can’t tell you whether if it will be next week, 6 months from now, or 2 years from now, but the markets will recover. And if history repeats itself the market will go higher than before and your portfolio that might be –30% at the moment will turn around and you will eventually make money.
Hold on to solid companies that pay out dependable dividends with a rock-solid chance of increasing dividends. This way you will get paid to wait and even if you are borrowing to invest, with today’s interest rates, you will be able to make money. Just relax and let the dividends roll in. You’ll be happy you did, and if you have an investing plan, which is all about having an investment perspective, then you will be very happy with yourself.
3) Investing is an Art just as much as it is a Science
You hear about all these complicated things on TV, just like how your well-dressed acquaintance (even they’re few and far between here in Vancouver) at last Saturday’s cocktail party told you about this new stock indicator that makes him money. You have to keep it simple. Sure there are people out there that use technical analysis (ex. Use of charts and indicators) to make consistent money but the reality is, it is not for everyone. By the way, there are people that say technical analysis cannot make money, but they are flat out wrong, technical analysis can make money if done right, it just isn’t easy.
When I say Investing is an Art, just like how each and every one of you will have a differing opinion in regards to what I write, you will have a differing opinion of what occurs in the market. Some of you might think that there’s some magical force in the markets where these groups of billionaire investors are controlling the market. Or aliens from Saturn on the 7th moon are actually converting Saturn Rubies into US dollars to buy more stocks of McDonalds. Or you might think like me and let the market do whatever it wants, and just ride the waves and make money that way by being patient.
Unless you are a day trader, just relax. It’s money but you shouldn’t be putting so much money in the market that your life depends on it. If you are, think twice. You should be diversifying your investments so that you can sleep well at night while having a steady growth in your portfolio for your future.
I watch CNBC and BNN, which is the CNBC equivalent in Canada, and while I find some opinions from the analysts quite interesting I’m watching it more for other things. I always like to hear what CEOs and other large company executives are talking about. There are also a lot of other interesting topics that are covered but at the end of the day, news is news and you have to take it with a grain of salt.
If there is anything you are going to take away from this article, I hope it’s that you need to have your own opinion of the market. Don’t worry about what the world or the market is doing, worry about what your goals and your reason for investing are in the market. The rest will take care of itself over time. Good luck and relax! Cheers!
Ginza, Tokyo photo by kevinpoh on Flickr.
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