Investment success requires patience and discipline. It requires a long time horizon. It requires a well thought out strategy executed methodically and dispassionately. It should feel boring. Slow and steady.
Too often people get distracted from staying the course. Catchy headlines, persuasive forecasters, clever marketing from fund management companies, anecdotal evidence of investment success from friends and colleagues – all these things are distractions. Distractions can be costly because they can steer you off course. Don’t be distracted. Slow and steady.
It’s possible to beat the market by picking stocks or calling market fluctuations over a short period of time. But that is not investing, that is speculating, more akin to gambling than investing, with success more likely due to luck than skill. Be an investor, not a speculator. Slow and steady.
Investing is science, not art. The evidence is clear and compelling:
- Return is related to risk.
- Trying to beat the market by picking outperforming stocks or trying to time the market underperforms a disciplined buy and hold strategy over the long run.
- Portfolios need to be well diversified.
- Asset allocation should be driven by risk tolerance.
- Trading should be done only as part of a disciplined re-balancing strategy.
- Costs are negatively correlated with investment performance so need to be kept low.
Slow and steady.
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