Many investors seem to have preconceived ideas about what makes successful investing.
These ideas seem logical and sensible so that even when evidence is presented to the contrary these misconceptions still want to hold sway in the investors mind.
These misconceptions are generally not helpful to successful longer-term investment.
What might some of these be –
• Knowing which shares to buy and when to be in the market is the key to investment success. Making money is in the timing. This is not true.
• A good investor advisor or investor will consistently predict which way the markets are going, and which shares will produce the best return in the short term. Not true.
• Successful investors trade often, darting in and out of the market itself or a particular share with uncanny skill. Their portfolios benefit from a hands-on approach. Not true.
• Studying past share price movements is an aid to predicting future price movements. This skill can be applied to both individual shares and the movement of the market as a whole. Not true.
• Economic predictions are reliable and form another strong foundation for success. Not true.
There is no doubt that being able to predict accurately whether investments are going to go up or down in the short term would be a wonderful and useful skill.
If we are able to successfully time our clients into or out of the market, we certainly will. We want to take all the profit opportunities for you that we can.
The problem is that timing the market and, using past movements or economic forecasts as a cast iron guide to the future have been shown not to work.
Yes, there are those who have successfully timed the market and made a lot of money. And there are times when the markets are clearly flying high, and it is a good idea to start selling or when interest rates look good for locking in rates.
But to consistently buy and sell at just the right time (or even close to it) is a skill which eludes everyone. It cannot be done consistently. And if not done successfully significant value can be eroded from the investments.
Success is gained from controlling those things that can be influenced to help our clients succeed - not by focusing on those things that can’t.
The key to success is “asset allocation” More on this in articles to come.
