Three reasons investors need to be brave

Three reasons investors need to be brave

Vanessa Stoykov

In my line of work, I deal with lots of professional fund managers. I have learned much from them – about conviction, buying against the crowd, and being prepared to take short term loss to make long term gain.

While I have no doubt that these are some of the most valuable attributes for professional investors, it’s also the very thing that makes being an individual – investing my own hard earned cash – quite scary. It’s easy to say in theory, but watching your account balance go down is a hard thing to deal with emotionally.

So real investors, those who are putting their own hard earned money into the market, need to be brave. Here are three ways to deal with the pressure of investing and keeping your head in falling markets.

You need to be certain of your strategy

If you know that you have your money invested for a certain period of time, then you also need to be sure that the investment strategy you choose is designed for the same period. Matching your timeframes and investment approaches is important and helps you weather those short term ups-and-downs.

You need to have faith in your managers because you understand their philosophy

Some managers are designed to underperform when others are running, but perform on market downsides; others are designed to take advantage of fast moving growth. If you understand philosophy, and it is aligned with what you believe makes a good investment, then it becomes easier to understand when a manager underperforms – which at some point in the cycle all managers will.

You need to be investing off a solid base

If the funds you have invested are all you have, and your risk is high, then the emotional roller coaster of performance is a hard one to get off. The magic of a good investment strategy is diversification – so different investments will perform at different times. If you are sufficiently diversified it can help you be brave.

While great investing is about assessing risk as much as opportunity, investors do need to be brave to weather investment markets. Otherwise they run the risk of missing out on the long term returns that true quality investing produces.

Until next time


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