By Matt Redshaw
“Should I be in, or out?”
An investor asked me this at a presentation a few months back. He wondered whether he should invest in the stock market or stay on the sidelines because the market might pull back.
As investors we all want gains, but don’t want any losses. We want to own investments with only upside and no downside. Unfortunately the world doesn’t work like that. But there are still many investors who achieve great success. How do successful investors achieve their success?
#1 THEY DON'T LET FEAR GUIDE THEM
Smart investors aren’t driven by their fears. There are always things to be afraid of. Here is a list of things we could have been afraid of every year for the past decade:
· 2007: Asset-backed security crisis
· 2008: Global financial crisis
· 2009: Fear of resumption of 2008 bear market
· 2010: Flash crash crisis
· 2011: US debt ceiling crisis
· 2012: European economic crisis
· 2013: End of US quantitative easing comments incites fear in markets – “Taper tantrum”
· 2014: Global economy fears
· 2015: Greece bailout, China slowdown
· 2016: Brexit, election of Donald Trump
· 2017: Geopolitical uncertainty, end of “Trump bump”?
Investors that get good results don’t act hastily, but they take action even when there’s uncertainty. They invest intelligently in good companies, good assets and good strategies. They don’t ignore risks, but fear is not the basis for their decisions.
#2 They Stick With Their Strategy
If you bought a good house in a good area and planned to own it for the long-term, what would you do if the real estate market dropped?
Assuming it’s still a good house in a good area, a smart home owner sticks with their plan.
When it comes to investing in other securities such as stocks or ETFs, there is no difference. Those who achieve the greatest success are those who stick with a strategy. They keep their eyes on the long-term goal. They have processes to help protect against losses, but even the best portfolios have periods when they are down. Sticking with a good strategy over the long-term has made many investors wealthy. Watch this 3.5 minute video to learn more how this process works.
#3 When Investments Drop, They Buy More
When things get tough and good investments get cheaper, not only do successful investors stick with the plan, they see it as an opportunity and buy more of those good investments. It’s like going to the supermarket and seeing your favourite chocolate bar on sale. You buy more.
This is one of the reasons we often suggest clients put part of their portfolio into steadier assets, such as our fixed income strategy. When good growth strategies drop in value, the client has steadier assets they can sell and invest into the growth strategies when they’re down. Emotions tell you to run away, but smart investors run toward the opportunity.
How to Deal with Uncertainty?
Successful investors don’t wait for perfect conditions. Fear doesn’t drive them. They create a plan and stick with it. They invest in good assets and strategies, and buy more when they drop in price. This helps them accumulate wealth over decades, while many wait until the conditions are just right.