STILLNESS
STILLNESS
Successful investors demonstrate caution in frothy markets and steadfast conviction in panicky ones.
STILLNESS
SNOOZE AND YOU DO NOT LOSE
This is a concept in investing that is often over looked.
As Warren Buffett once said, “I make more money when I’m snoozing than when I am awake”.
The virtue of staying still cannot be emphasised enough.
What Mr Buffett wanted to say is that the frequent chopping and changing and re-balancing and re-adjusting of portfolios usually means that the only people benefitting from this churn are the fund managers and the investment company – through fees and charges.
THE ART OF STAYING STILL
The more we stay still in investment, the better our chances are to secure a good return.
Indeed investment companies and fund managers do not like people staying still as the lack of movement does not translate well into fees.
Some advisors would even suggest that we should review and re-balance your portfolio at least annually, if not twice per year.
Do not pay any heed to such recommendations.
They will not serve you well.
TIME IN THE MARKET
No one knows when financial markets will rise (a bull market, when prices are generally rising) or when they will fall (bear market, when prices are generally falling).
Always remember: those who say do not know and those who know do not say!
Do not time the market by waiting for the perfect time to buy or sell.
Instead, know that time "in the market" is more critical for long term wealth creation.
EIGHTH WONDER OF THE WORLD
Stock markets can be a very turbulent and volatile environment, so you need to keep still. Very, very still. In other words, do not buy or sell because someone tells you to.
Recognise that you don’t know and neither do they.
The more time you leave for investments to grow, the more they will grow. The powers of compounding truly come into effect over a long and patient period of time. Albert Einstein is said to have called compounding as the eighth wonder of the world. The curve of compounding that you see racing up, takes time but once it takes hold, the sky is the limit.
We need to be patient for all good things to come to us. Remember what Alexander Dumas said in the Count of Monte Cristo:
All of world’s wisdom is contained in two words – wait and hope.
SUMMARY
We must be patient and not make knee jerk reactions to what we see in the Bloomberg Market Close - no matter how excitable Romain Bostick may sound.
If we don’t understand something, then either we should learn more about it or stay away - we should definitely not act on something that we ourselves are not too sure of.
It is true for investing as much it is for life.