Successful investing is not easy, although it should be. Unfortunately human nature and our emotions often get in the way of investment success. A great deal of time and energy is put into trying to predict the future. But just like Yogi Berra said, “It’s tough to make predictions, especially about the future.” Our society is addicted to instant information. At every turn your smart phone, tablet, PC, print media and TV are all bombarding you with information 24/7 about the direction of the markets, economy and interest rates. At the end of the day, none of it really matters. The future is unknowable and all of those talking heads on CNBC cannot predict the future any more than you and me.
Don’t get me wrong. A working knowledge of available investment products and an understanding of how different asset classes interact with each other can give you an edge. Staying informed and studying history can give us some perspective on current events. I certainly have some opinions as to what the outlook might be and it is very important to understand how major long-term trends will affect the economy and the markets. My point is that the daily information overload does little to help us make intelligent investment decisions. It is just “white noise” that distracts from what is really important.
So what is really important? I believe there are certain investment basics that never go out of style. These guidelines can bring you success no matter what the future holds. I call them my Five Tenets for Investing:
1) Invest with a plan. Sounds basic enough but have a specific plan and time frame for your money. Is your goal to “beat the market” or are you simply trying to make sure your money will provide you a worry free income during retirement? There is a big difference. Decide what is important to you and to meeting your goals.
2) Diversify. Invest globally and maintain exposure to a variety of asset classes. This means that there are always going to be some things doing better than others at any given time. Resist the temptation to change your plan and pile into the asset class that is doing best right now. We want some things to zig when others zag!
3) Invest with a professional. Get some help. A professional can help you put a plan together to reach your goals and manage risk. More importantly, a professional cam help take the emotion out of investing by injecting some rational thinking and perspective. This is crucial during volatile periods.
4) Invest continually. Up or down markets, keep reinvesting and adding to those accounts. Regardless of what future investment returns will be, it is certain that the more you save the more you will have at retirement.
5) Have patience. The most important tenant of all.It is also the toughest for most investors to follow. Investment results are measured over many years, not quarter to quarter, month to month or day to day. You have got to stick to your plan.Too often, investors derail their long-term plans by making emotional, short-term decisions. We have all heard it a million times (maybe because it is true!) … you have to invest for the long-term.
Investing can be easy if you stick to the basics.
This is my last column for Alive. Thank you for reading. I hope it has made some of you better investors. Good luck and happy investing!
Damien helps individuals invest and manage risk. He is a Certified Financial Planner™ professional and a principal of Walnut Creek Wealth Management. These are the views of Damien Couture, CFP® and not intended as investment advice. Additional risks are associated with international investing, such as currency fluctuations, political and economic stability and differences in the accounting standards. Your comments are welcome. Damien can be reached at 925-280-1800 x101 orDamien@WalnutCreekWealth.com.