There are so much control you have over stuff in the field of investment. The earlier you accept the fact that you can’t control the market you don’t have power over everything, the happier you will be.
It’s the important things you can control that should take most of your time and efforts.
Example – rather than stocks trading, it makes more sense to add more skillset into your skillset list to get that promotion, increment or even starting your own business. One never loses out by adding more value to himself.
A real advisor should be the thing between YOU and the BIG MISTAKE – in other words, an adviser helps you to manage things which you can control (risks) instead of promising you high returns (which no one can control).
Even after you sort out the facts and figures around a financial decision, you have to navigate the emotional complexity that comes with money. In other words, money will make you act irrationally at times. Keep your feet grounded and always remember that the best financial moves are usually very straightforward – nothing of the rocket science type. This of course, comes with experience and by losing some money here and there along the self learning journey.
And the way our financial system works (things you cannot control), even if you’re making great decisions coupled with perfect execution, you still might be disappointed (aka under performance of investment returns). Accept this fact and move on, with a resolve that you’ll learn from that and tweak your behavior accordingly, if applicable. Don’t fret on things you cannot control (like the crude oil price drop in the end of 2014 causing Oil and Gas stocks to plummet)
The fact of the matter is – one will come to realize that no matter how complicated investing or its products may get, some things (like self behavior) matter more than others (timing the market, stock hot tips from your uncles and aunties).
Your portfolio design is one of the things that matters which you can control. A well-constructed portfolio can be the difference between good investment outcomes and disappointment. The elements, like those shown below, should create one cohesive unit. Some may even call it prudent asset allocation.
For instance, proper diversification of assets isn’t just about having multiple types of one investment — it’s about making sure your investments are significantly different from each other (different industries, negative correlation, bonds vs equities, properties in different locations)
And it’s OK that the path between you and your financial goals isn’t a straight line. No one path to their financial goals is a straight line, just like the short term fluctuations of the market. But in long term, it will inch closer to your eventual goals so ignore the short term distractions.
As long as you stay focused on achieving your own financial goals instead of being sidetracked by what other people most value, you’ll get there.
If you are the type who are prone to fall for the typical market cycle, always paint this picture in your mind (below).
Discovered a thing which works most of the time for you? Rinse and repeat.
Last but not least, adopt the right attitude. Have a feeling of gratitude for the people in your life who make you not only make you grow financially, but also make you happier as a person.
Excerpt from Business Insider – an article by New York Times columnist, author, and financial planner Carl Richards who has made a career out of exposing and analyzing what he calls the “behavior gap” — the gap between what you should do with your money and what you actually do.