There are a few things. Firstly, find out why most investors fail, or at least get lower returns than expected.
It isn’t for the reasons you might expect. In most domains, lack of knowledge is the biggest reason.
It can contribute in investing as well, but it isn’t the main reason. The most striking example of this is the fact that the dead outperform the living in investing:
They even outperform people with PHDs in portfolio construction theory and top wealth managers.
The reason is simple. The dead aren’t watching CNBC and worried about the latest thing which can rock markets (elections and covid in 2020, Russia and Ukraine this year).
They don’t panic if markets do crash, or try to predict the next crash. And they don’t allow bias’ to affect investing.
This isn’t an isolated case. I have ran out of the number of people who have told me that there best performing accounts were ones they forgot about.
Typically, they were small accounts which their parents set up, or ones where they withdraw 90% of the money decades ago, and kept a small balance.
When they looked at the valuations after forgetting about if for decades, they were pleasantly shocked, and usually those accounts did the best.
The point is, being more active won’t automatically get you higher returns. In fact, the more you analyse, the more you are likely to over-analyse and lose out.
The best investors just
- Invest today, don’t procrastinate or try to find the best moment to invest into markets.
- Control emotions. They either hire advisors or learn to control their own emotions. This sounds simple but gets more difficult the longer you invest, because moments like 2008 and 2020 will come along every so often.
- Have a well diversified portfolio, especially as they age.
- Hold dividend paying assets, and reinvest those payments.
- Don’t just get into the next big fad.
Basically, simplicity can beat complexity in investing. In terms of things to think about, the best thing is to align your life goals to your investment strategy.
If you are looking for something specific, let’s say early retirement, this gives you something to aim for.
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