Here is my 4 biggest investing lessons.
Identity A Sustainable Investment Strategy That Suits You
When I first started investing, I wanted to become a value investor like Warren Buffett, but later on, I realized that type of investor needs to dedicate tremendous time to read annual reports to study the intrinsic value of companies. That’s something I don’t have time and interest to do.
Later on, I found out passive index fund investment suits me the best. This requires very little time and effort but gives you an average market return, which meets my investment needs. I also experimented with different stock vs fixed income combinations like 70:30 and 60:40 and found the ratio which gives me acceptable return and sound sleep. Since then my investment is made in auto-pilot. I hope you can find your strategy too and stick to it in the long run.
Manage Your Emotions
Our biggest enemy in investing is not the market, but ourselves. We often get emotional, sometimes greedy, and sometimes fearful, when the market price fluctuates. Emotion usually leads to irrational decisions. It’s best to plug ourselves from market movements. I think it is ok to listen to financial news like CNBC or Bloomberg but those should be mainly for educational and entertainment purposes. Never make an investment decision based on something you saw on TV or the internet!
I opened my first brokerage account in my 20s, and bought a few shares, but went panic during a market downturn, sold everything, and exited investing. I finally went back into investing after a few years but missed the bull market in between. If I stayed invested I would be in a much better place today. The lesson I learned is always stay invested.
Pay Attention To The Cost
During my early years, I used a brokerage firm that charged high transaction fees and bought mutual funds with high management fees. I didn’t notice those fees but they had eaten into my returns significantly over the years! Finally, I realized the price I paid and switched to low-cost index funds and low-fee brokerage firms. I wish I could’ve known this much earlier!
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