Keeping your cool when investing
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.
A common trait of successful investors is composure. If you look to investing giants such as Warren Buffet, he has held his investments for the long term, seemingly unflustered by short term fluctuations. Whether there’s gains or falls in the markets, you shouldn’t get too carried away. One of the most important things to do is keep your cool.
Ups and downs in the markets can be a regular occurrence, so if you’re watching your investment too closely it could start to feel like a psychological rollercoaster. Naturally, the human reaction of taking flight can instinctively kick in when the prospect of loss is presented. What you actually need to do is take a step back and look at the bigger picture.
A mindful approach is useful when markets fluctuate. Remind yourself that taking risk opens up the opportunity for growth. Assure yourself that a long-term strategy can help you to ride out fluctuations in the market. Keep your cool and be mentally strong, accept that some degree of volatility is actually normal for investments.
Investing is about perspective. If the markets are down, you could choose to see this as an opportunity to own Stocks & Shares at a reduced rate. Investors should invest for long term goals, so lows are actually beneficial for investing, giving you the potential to ride a growth curve towards highs.
Although past performance isn’t a guide to future performance, the stock market recovers from even the biggest blows. For example, the FTSE 100 recovered from the recession of 2008 and went on to be valued higher than it was in 2007. If you’re investing for decades towards retirement you are naturally going to have lows, but you’ll in theory have the time to eventually hit a point higher than where you started. Just take a look at this hundred year retrospective of the Dow Jones Industrial Average stock market index, it goes to show that even with heavy drops the stock market is in the long run always going up.
One of the ways you can keep your cool is by investing at a level of risk that you are comfortable with. At True Potential Investor you can take our online assessment to get an idea of which of our Fully-Managed Investment Portfolios is best suited to you. Our risk questionnaire will take your answers and use the insights to ensure you’re invested at risk level you’re going to be comfortable with.
For example, as a defensive investor you may accept lower potential returns in exchange for less fluctuations. The opposite is true of an aggressive investor, you can handle more fluctuations in exchange for potential higher long-term growth. By investing at the level you are most comfortable with, you are more likely to keep a cooler head throughout your investment.
Another factor in managing risk is diversification. By not putting your eggs in one basket, you have that extra reassurance that at least if one part of your investment underperforms you could see another part hold stable or over perform. At True Potential Investor we have access to 9,000 experts in 200 locations, meaning your investment is in safe hands on a globally diversified scale.
Use our online assessment today and discover which of our Fully-Managed Investment Portfolios is most suited to you.