Economics

INVESTING IS LIKE A GAME OF FOOTBALL

The Financial Engineer

Much like in football, often you go a goal down within the first 10 minutes, this doesn’t mean you’re going to lose the game. It simply means it takes balls and grit to develop the staying power and nerve to stay in the game. Conversely, often teams go up one or two goals within the first 10 minutes of a game and still lose!

It is well recognized that the best way to create wealth is to take a long-term view on investments and to have the staying power to go beyond 5 years at least. What’s the alternative – go where all the other sheep go…a bank! Show me how many people have become millionaires from a savings account. Go figure…That’s an article for another day…lookout for my next article – Why NOT the bank…

The rules of engagement for investors

  • Pick a strategy and stick with it. There are many ways to be successful and no one strategy is inherently better than any other. Changing strategies or goals often is asking to lose money.
  • Put your personal finances in order first. Investing without a goal is bad, but investing when you have high-interest debt is much worse. 
  • Invest in a well-diversified portfolio, across asset classes and countries – it spreads your risk
  • Use the power of compounding. Start investing sooner rather than later. You will be amazed what a difference it makes to your investment returns
  • Don’t sweat the small stuff. As a long-term investor, you shouldn’t panic when your investments experience short-term movements, however don’t hold on to investments unnecessarily if they continue to underperform over long periods
  • Don’t chase a hot tip. When you make an investment, it’s important you know the reasons for doing so: do your own research and analysis or ask an adviser
  • Don’t try to time the market. Even the experts frequently get it wrong
  • Don’t chase the best performing asset classes or funds. You are too late already
  • Don’t put tax concerns above all else. You should always attempt to minimize the amount of tax you pay and maximize your after-tax return but remember that your primary goal is to grow and secure your money
  • Focus on the future. Investing is about trying to make informed decisions based on things that are yet to happen

FACT

One of the simplest things in live is to do the same small thing every day, or every week or every month. Strangely, 97% of human beings gets this wrong…

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