Lessons Learned About Investing From A Business News Junkie
Unless you’re like me, you’d much rather spend your time doing almost anything but listening to BNN (Business News Network). Lucky for you, I love this stuff and get my daily fix while working out on the treadmill. What can it teach you? Here’s my take on what you really need to know about investing your hard earned savings. Stick to these principles and and then get back to doing the things you really enjoy.
Ignore The Short Term Noise And Focus On The Long Term
Daily fluctuations in financial markets can be substantial and worrisome. Both good and bad news from every part of the world will often impact the value of your investments. Unless you are a day trader or avid investment enthusiast, ignore the noise. You will sleep better at night! Keep in mind one of my favourite Warren Buffett quotes: “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
Even The Experts Can’t Predict Financial Markets
Case in point- the US housing/mortgage crisis. There are many smart people that are paid lots of money to provide investment and financial advice. If you listen long enough, you will hear opinions that are all over the map. Studies show that the majority of investment managers do not outperform the market over the long term. Be conservative in your planning and assume you will earn a rate of return consistent with (not greater than) financial markets.
Have a Plan and Stay Invested
Know how much risk you are willing to take and plan accordingly. A well thought out investment plan and strategy should NOT require constant adjustment. Studies show that those who stay invested perform significantly better than those who try to time the market ups and downs or trade too much. Remember that the frequency and magnitude of investment fees can substantially affect your long term performance.
Everything In Moderation
Minimize your risk by spreading out your investments across many categories. That means considering different types of investments (i.e. stocks, bonds, GIC’s, real estate etc.), industries (financial, utilities, consumer products etc) and geographies (Canada, USA, global). If you invest in the stock market, you will always have both winners and losers. What matters most is the perfomance of your TOTAL portfolio over the long term. Make your investments as tax efficient as possible, especially if you are in a high tax bracket. It’s all about how much you keep in your pocket after tax (not before tax).
If you are comfortable investing on your own, by all means go for it! If not, find a trusted, knowledgeable professional to help.
When it comes to investing, do what’s right for you, have peace of mind and watch your nest egg grow. Investing should be a marathon, not a sprint!