Those who enter the world of investment will know there are temptations aplenty and sometimes you can get a little bored. Maybe your shares aren’t moving like you expected, others are banking greater profits than you or you are just looking for the next challenge. In the world of investment it may surprise many people to learn that boredom can sometimes be the greatest challenge.
If it ain’t broke, don’t fix it
If you have a portfolio which is doing well, plodding along and at least keeping up with the market, then why make any changes? Making change for the sake of change is a recipe for disaster because at some point you will make a mistake, end up chasing your tail and perhaps buyback your previous investments at a higher price. Always take a long-term view when looking at investing in a share or any other type of asset and if a short-term profit arises then count this as a bonus.
Following the trend
Each investor will have their own way of doing things, their own preferred research portals and ultimately they will try to tweak traditional strategies to suit their own situation. If we use football as an example, you can try different strategies, different formations but ultimately get the ball in the net. The world of investment is very similar, you are looking for assets which are undervalued in the longer term – eventually selling them for a profit. Sometimes it is easy to get caught up in areas such as trade options and other more complicated investment tools, but never lose sight of the simple target.
Listen to the markets
The world of investment is littered with individuals and companies who thought they knew better than “the market”. While the market is not a living breathing instrument it does take into account the views of all investors and then a share price is arrived at. As we have mentioned on numerous occasions, public and inside information will often impact a share price, leading to “puzzling” movements. It is only when privileged information is made public that perhaps the whole picture becomes clearer.
There will be occasions where the market “gets it wrong” but ultimately the price of an asset will reflect uncertainties at the time as well as privileged information. Listen to the markets, do not continuously fight against the markets and, if it ain’t broke, don’t fix it. Use the power of the markets to your advantage.
Long-term timescales pay dividends
If we look back 10 or 20 years we will see individuals and companies who made significant returns on short-term investments. However, where are they today? Have they fallen by the wayside? Were they caught out by a market correction?
If we reset our search to investors who took a long-term timescale and showed confidence in their investments, the likes of Warren Buffett, how many of those are still around? While you obviously need to get the investments right in the first place, those who forego relatively small short-term profits will often be rewarded if their long-term research is good.
Again, there is absolutely nothing wrong in taking a short-term profit if it is placed before you – even if you invested on a long-term basis. The danger comes when people invest on a short-term basis for a relatively small profit and are caught out by company, sector or market specific downturns. A number of relatively small short-term profits can very easily be wiped out by a market downturn – just ask those caught out by the bursting of the tech bubble at the turn of the century.