“The individual investor should act consistently as an investor and not as a speculator.” Benjamin Graham
Investing is hard when our emotions cause us to shift from being an investor to a speculator. Our best outcome is most often when we’re able to stay invested, not when we try to sell high and buy low (which is generally more sheer luck than accurate planning).
If you’re understandably nervous as an investor, fear not. While no portfolio is fireproof to completely uncontrollable events like black swans and major unforeseen global macroeconomic circumstances, there is a lot we can do to limit exposure to market-affecting shenanigans locally and abroad.
Don’t make any sudden moves
When it comes to investing, always remember: any change costs something. A change in direction when everyone else is pulling the same change (like investing offshore), is also expensive. Avoid suddenly pulling huge lump sums out of equities and into a different class without it being in line with your long-term strategy.
A move like this, which may seem simple enough, could cost you five times: the price of the fee to pull money out of equities, the setup price of moving into bonds, the loss of momentum on your equities, the loss of any compounding you may have been about to tap into or eventually attain on your equities and the price of starting from zero in the new asset class.
Switching things up in your portfolio is sometimes necessary, but we must do it with a comprehensive strategy, not a panicked whim. When nearing the end of an investment term, it could be an excellent time to change your weight in various classes and diversify your portfolio. Feeling scared watching the news is not.
Manage your emotions
It’s incredible how simple logic is so quickly questioned when buying seasonal gifts, expensive holidays, one-day-only-deals remorse and the like. Against this highly emotionally charged backdrop, we tend to behave a little irrationally. And, when it comes to investing, unchecked emotions = dangerous.
When markets are predictable, it’s easy to stick to our investment strategy, but as soon as they dip or drive, we may try to knee-jerk sell or buy. Don’t do it. Unless a major macroeconomic event like the actual apocalypse is happening, let’s have a quick WhatsApp catch-up or a short phone call to double-check the best options.
Ultimately, investing always works best when you have a trusted, second opinion to every move you want to make. Either knuckle down and focus on the people around you and let your money work for you, or let’s get in touch and have a comforting cup of coffee to bolster your portfolio.