The title says it all … investing is not about following what others say, but instead about understanding what type of financial outcomes you want and how best to achieve them. This calls for independent (but informed) thinking that is aligned to your specific needs.
As a result of the internet there is a phenomenal amount of information available to investors today. Companies’ financial statements are readily available, as are analysts’ reports and financial news sites that provide summary information on both the market and individual investments. One of the dangers is that investors may take such sources of information as unbiased and objective. Instead each should be viewed as just what it is … a source of information presented for a specific purpose, with the information being shaped to that purpose.
This is not to say that investors should ignore such information, but instead that they should use their own judgment in sifting through it and making decisions about what investments are best for them. And in many ways the particular investments made are less critical than two other factors that will impact the long term value of ones portfolio.
How soon you get started – Many have written about the power of compounding, but it definitely bears repeating. Regardless of how much one invests, the sooner it is begun the longer one will have for the gains to compound, creating an exponential growth that will result in a much larger portfolio than if one had started later in life and made larger investments.
Don’t loose big – It takes a 100% gain to make up for a 50% loss, so it is important to avoid a significant loss of capital by either investing in things that can’t or are unlikely to go down, or to take a limited loss if they do. Of course everyone’s risk tolerance is different, but one of the more consistent practices of the wealthy is that they tend to invest conservatively.
Investing for your self then means being aware of what you want, and making sure that your investment decisions are in line with your values and priorities. Although others (websites, newsletters, paid advisors) can provide you with interesting and useful insights, their interests will never be as closely aligned to your interests as your attention can and should be … focused on self.
© 2006 Duke Okes
Duke Okes helps individuals and organizations perform more productivity and professionally. He can be reached at http://www.aplomet.com