Mindset: A Sustainable Perspective on Investing
Many conflate a business’s value with its stock price.
This flawed perspective existed before social media, but the speed of information mitigated some of the damage. Investors just couldn’t act too quickly into poor investments because by the time they had to decide whether or not to invest into an asset, information would have been mature enough to show that it was no longer a great investment.
This changed as the use of social media exploded.
Now, information is lightning fast. We can read a headline about a company’s stock and instantly buy. We do not want to miss out on the possible gains.
When the buying frenzy rampant, the inexperienced investors are actively putting hard-earned money into these assets. This flawed thinking has resulted in subpar results for many investors.
On the other hand, when the asset prices falls, investors are hesitant to jump in at an ideal entry point. This is, of course, if the underlying value of the asset remains intact.
Tips for the Defensive Investor (this is most of us):
- Buy the entire market. Through an index fund that tracks the S&P 500. Individual stocks are great if you know how to value them and can stomach the ups and downs. But most can’t, so buy this instead.
- Invest regularly (dollar-cost average). Invest the same amount at the same time. You’ll buy at high points, low points, and everything in between. You take out emotion with this approach.
- Add other investments slowly. Don’t try to mimic someone else’s strategy without first understanding it. They’ve developed that strategy through years of experience. Instead, add other types of investments slowly.
- Get rid of debt. You can never go wrong with this. This will free up cash flow to plow into investments.
This is the most sustainable way of investing. It is a long game that cannot be won by sprinting and thinking you can win by doing so.
The turtles win the race almost always.
This post was created with Typeshare
