Canadian Capitalist recently did a timely postabout not fretting over every little squiggle in the market. Just to echo that theme as volatility hits markets these days, perhaps it may be worthwhile to remember that investing is more about character than brainpower. People dont need extraordinary insight or intelligence. What they need most is the character to adopt simple rules and stick to them, wrote Jason Zweig in Your Money and Your Brain.
A good soldier doesnt lose their nerve at the sounds of enemy gun fire. They look for their opportunities. Wall Street is littered with the bones of those who know just what to do, but could not bring themselves to do it, remarks William Bernstein in The Investor’s Manifesto.
Seasoned investors dont need to give themselves a pep talk. But those relatively new to the game might consider some psyching-up techniques to reinforce their fortitude. Those investment guides they read a while back may not be enough — as discussedin Why Investors Get Burned.
People may read an investing book that tells them they can get an average 9% per year if they only buy and hold stocks over the long term so they take the leap. However, when the marketcraters, the actual experience turns out to be a lot different than reading about it in a book. Newspaper headlines are full of doom and gloom. The permabears get more air time .
Athletes usemental techniques to boost performance. Investors might consider similar tricks. For example, you can detach from the daily news flow and imagine how calm and expansive the market will likely be in another year or two. Dipping into histories of financial markets and keeping the innate nature of financial markets fresh in mind may help, as well. So too may reviewing the more solid investment guides help instill inspiration and renew enthusiasm.
The most important investment ability of all is emotional discipline, William Bernstein in The Investor’s Manifesto.
Recency is the tendency to give too much weight to recent experience while ignoring the lessons of long-term historical evidence. Larry Swedroe and Jared Kizer in The Only Guide Youll Need to Alternative Investments.
You should have no expectations about short-term and year-to-year returns on stocks.In investing we are our own worst enemiesour emotions get in the way. Chandan Sengupta in The Only Proven Road to Investment Success
If you cant handle the short term, if the uncertainty is stressful and the headlines are unbearable, then the markets are too hot for you: get out of the kitchen. Moshe Milevsky in The Probability of Fortune.
As George Soros once said: if you are going to be in the stock-market game, you have to endure the pain . Perhaps, by learning a bit of history, you can assimilate the lesson vicariously without bearing the costs. Burton G. Malkiel in The Random Walk Guide to Investing.
Without a rock-solid belief in the fundamental principles that undergird an intelligently crafted portfolio, weak-kneed investors face the likelihood of a disastrous whipsaw. David F. Swensen in Unconventional Success
After youve been investing for a while, the whole thing seems simple .Successful investors have the patience to wait out market fluctuations Andrew S. Clarke, and Jack Brennan in Wealth of Experience: Real Investors on What Works and What Doesnt
In the euphoria of a bull market investors think theyre much bigger risk takers than they really are. Walter Updegrave in Were Not in Kansas Anymore
The hard part for most investors is ignoring the noise of the market, the Wall Street Establishment, the media and the emotions caused by all the noise. Larry E. Swedroe in Wise Investing Made Simple
The time to decide youve taken on too much risk isnt the day after the market is down 20 percent .To the extent that we want to dampen the volatility of our stock portfolios, we just add bonds. Ben Stein and Phil DeMuth in Yes, You Can Supercharge Your Portfolio
Everyone knows that you should buy low and sell highand yet, all too often, we buy high and sell low. Jason Zweig in Your Money and Your Brain
Setting a goal, developing an appropriate asset allocation are not hugely complex tasks. The hard part comes next: battling your emotions so that you can stick with your plan through thick and thin. Andrew S. Clarke, and Jack Brennan in Wealth of Experience: Real Investors on What Works and What Doesnt
Like dieting, investing is simple but not easy,Jason Zweig in The Little Book of Safe Money.