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Thu, 01 Apr 2010 - 21:40
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Daily Equity Report
*Choosing an investment philosophy*
A book on investment philosophies set out a roadmap to choosing an investment philosophy because there is no one investment philosophy that is best suited for all investors. A strategy that works for a patient investor and has substantial capital to invest may not work for an investor with unpredictable cash needs and a smaller portfolio.
Over the next few weeks, I will consider some of the relevant points made. Indeed we always need to keep these in mind when we are consulting with clients.
Firstly we will consider the personal characteristics under self assessment:
Personal Characteristics
Investors who select investment philosophies that do not fit their personalities are destined to abandon them sooner rather than latter. You cannot be a successful investor if you do not have a clear eyes view of your own strengths and weaknesses: Look at the following.
. Patience: Some investment strategies require a great deal of patience, a virtue that many of us lack.
. Risk Aversion: Your willingness to bear risk should play a key role in what investment philosophy or strategy you choose for yourself.
. Individual or Group Thinker: Some investment strategies require you to go along with the crowd and some against it. Which one will be better suited for you may well depend upon whether you are more comfortable going along with the conventional wisdom or whether you are a loner.
. Time you are willing to spend on investing: Some investment strategies are much more time and resource intensive than others. Generally, short-term strategies that are based upon pricing patterns or on trading on information are more time and information intensive than long-term buy and hold strategies.
. Age: for individual investors, age clearly will make a difference in your choice of investment philosophy. As you age, you may find that your willingness to take risk, especially with your retirement savings, decreases.
These are signs of a misfit in the investment philosophy:
1. You lie awake at night thinking about your portfolio. Investors who choose investment strategies that expose them to more risk than they are comfortable taking will find themselves facing this plight. It is true that your expected returns will be lower with low risk strategies, but the cost of taking on too much risk is even greater.
2. Day to day movements in your portfolio lead to reassessments of your future: While long term movements of your portfolio should affect your plans on when you will retire and what you will do with your future, day-to-day movements should not.
3. Second guessing your investment decisions: If you find yourself second guessing your investment choices every time you read a contrary opinion, you should reconsider your strategy.
We take this opportunity to wish you a blessed Easter weekend
Kind regards
Ian de Lange
info@seedinvestments.co.za
Thu, 01 Apr 2010- 16:27
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Daily Equity Report
Choosing an investment philosophy
A book on investment philosophies set out a roadmap to choosing an investment philosophy because there is no one investment philosophy that is best suited for all investors. A strategy that works for a patient investor and has substantial capital to invest may not work for an investor with unpredictable cash needs and a smaller portfolio.
Over the next few weeks, I will consider some of the relevant points made. Indeed we always need to keep these in mind when we are consulting with clients.
Firstly we will consider the personal characteristics under self assessment:
Personal Characteristics
Investors who select investment philosophies that do not fit their personalities are destined to abandon them sooner rather than latter. You cannot be a successful investor if you do not have a clear eyes view of your own strengths and weaknesses: Look at the following.
• Patience: Some investment strategies require a great deal of patience, a virtue that many of us lack.
• Risk Aversion: Your willingness to bear risk should play a key role in what investment philosophy or strategy you choose for yourself.
• Individual or Group Thinker: Some investment strategies require you to go along with the crowd and some against it. Which one will be better suited for you may well depend upon whether you are more comfortable going along with the conventional wisdom or whether you are a loner.
• Time you are willing to spend on investing: Some investment strategies are much more time and resource intensive than others. Generally, short-term strategies that are based upon pricing patterns or on trading on information are more time and information intensive than long-term buy and hold strategies.
• Age: for individual investors, age clearly will make a difference in your choice of investment philosophy. As you age, you may find that your willingness to take risk, especially with your retirement savings, decreases.
These are signs of a misfit in the investment philosophy:
1. You lie awake at night thinking about your portfolio. Investors who choose investment strategies that expose them to more risk than they are comfortable taking will find themselves facing this plight. It is true that your expected returns will be lower with low risk strategies, but the cost of taking on too much risk is even greater.
2. Day to day movements in your portfolio lead to reassessments of your future: While long term movements of your portfolio should affect your plans on when you will retire and what you will do with your future, day-to-day movements should not.
3. Second guessing your investment decisions: If you find yourself second guessing your investment choices every time you read a contrary opinion, you should reconsider your strategy.
We take this opportunity to wish you a blessed Easter weekend
Kind regards
Ian de Lange
info@seedinvestments.co.za
www.seedinvestments.co.za
021 9144 966
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