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10.Don't chase performance
A common failing of investors is investing in the rear view mirror, chasing performance by buying more of an asset, sector or stock that has performed the best in the most recent time period. A large body of evidence tells us that this leads to underperformance in the long term. Assets that attract the largest amount of inflows subsequently underperform. Investors must accept that no strategy, investment or approach will outperform in every market environment.
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1. Take the rough with the smooth
Timing the market is notoriously difficult, even for the most experienced investor. People often focus on trying to dodge the bad days but fail to realise that missing even a few of the best days can be equally damaging. The largest gains tend to occur during periods of extreme volatility and oft...
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5. Build a robust portfolio
Diversification is probably the most commonly quoted piece of investment advice. Yet unfortunately, time and time again people tend to over concentrate their investments in a specific stock or asset. The idea behind diversification is that it spreads out risk and therefore helps mitigate all kind...
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9. Don't let your emotions cloud your judgement
Emotion is dangerous when investing. Unfortunately, it is too easy to become emotionally attached to investments when they are increasing in value. We feel comfortable when we are invested & often actively look to add to winning positions. When the market is doing well it may seem that an individ...
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3. Time in the market, not timing the market
The longer you invest for, the better your chance of success. For example, from 1990 - 2016, the average investor will have had a turbulent journey - the dotcom bubble & financial crisis were 2 of the worst bear markets recorded. Yet over that period the return in a back-test of our moderate gr...
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7. Invest counter cyclically
Instead of following the herd, investors should take their lead from the economic and business cycle. One of the few constants in investing is that all economies are cyclical – that is they expand and then contract. By focusing on the cycle, investors can determine the prospect for different asse...
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8. Price is what you pay, value is what you get
Overpaying for investments is a common mistake. The most recent examples of this phenomenon were the housing bubble in the run up to the financial crisis. Private investors often do not have access to the same range of data as institutional investors so they often get cau...
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6. Don't follow the herd
“Irrational exuberance" was a phrase championed by former Federal Reserve Chairman Alan Greenspan to explain investor’s behaviour in the mid-to-late 1990s. Although it took a number of years for the bubble to burst, the phrase epitomises the tendency of investors to get most bullish just...
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2. Drown out the noise
Many investment houses and brokerage firms profit when investors buy or sell shares. This leads to a lot of noise in the market and it is often difficult to detangle good information from bad. It is challenging to distinguish good financial ‘experts’ from bad, as they are often more concerned wit...
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4. Geopolitics (often) matters less than we think
It is easy to focus on what can go wrong in the world and extrapolate these geopolitical events into investment returns. Yet geopolitical shocks (outside of world wars) tend to exhibit little or no relationship to returns. Last year was a case in point. Brexit and Donald Trump’s election as the U...
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Passive Investing
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Investing in Stocks
- It means investing in common stock, which is another way to describe business ownership or business equity.
- When you own equity (the value of the shares issued by a company) in a business, you are entitled to a share of the profit or losses generated by that company's operatin...
Stoic Path To Wealth: Grow Money
Stoic investors make smart, balanced bets. Most of us invest in secure funds with low returns. Investors looking at bigger returns opt for index funds. If you are okay with losing money, that does not mean that you should.
The 90/10 investing thumb rule states that we should put 90 percent...
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