Happy Passover!
And the markets are closed Friday for Good Friday so it’s a good time to have a nice, overall conversation about the investing strategies that guide us through life and, hopefully, lead us to the promised land of a happy retirement.
After giving it some thought, here are my 10 Commandments for Investing:
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Thou shall invest regularly: Consistent and disciplined investing is a key to long-term success.
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Thou shall diversify: Spreading your investments across different asset classes, sectors, and geographies can help to reduce risk along with sensible hedging strategies.
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Thou shall have a well-defined investment plan with realistic expectations for returns: A well-defined investment plan will help you stay focused and avoid making impulsive decisions.
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Thou shall be patient: Investing is a long-term game. Don’t get discouraged by short-term fluctuations in the market.
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Thou shall not time the market: Trying to predict short-term market movements is difficult and can lead to costly mistakes.
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Thou shall Be the House, NOT the Gambler: Secure an asset and then sell the risk premium to others.
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Thou shall not chase trends: Investing in trendy stocks or fads can be tempting, but it’s important to focus on the long-term Fundamentals of a company.
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Thou shall not let emotions drive investment decisions: Fear and greed can lead to irrational investment decisions. It’s important to stay level-headed and stick to your plan.
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Thou shall find value: The stocks you invest in should, for the most part, be generating comfortable, sustainable returns NOW – not in the future.
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Thou shall regularly review and rebalance your portfolio: As your investment goals and market conditions change, it’s important to periodically review your portfolio and adjust your asset allocation accordingly.
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When it comes to investing, there are countless strategies and techniques that Investors can use to try and achieve success. However, at their core, all successful strategies share a few common principles. At PhilStockWorld we are, at our core, Value Investors who believe that these principles include having a well-defined investment plan, being patient, and avoiding emotional decision-making.
We also develop our skills using tools like Futures and Options, which can be used to generate income, protect against market downturns and enhance our returns on existing positions. It can be tempting to use options to amplify returns, but over-leveraging can lead to significant losses. It’s important to use options within the context of a well-diversified portfolio and not to exceed your risk tolerance.
Beyond these core principles, successful investors also need to have a deep understanding of the market and the forces that drive it. This means staying up-to-date on the latest news and trends, and having a keen eye for spotting opportunities before they become mainstream. At PSW, we believe that one of the keys to success in the market is to think like a contrarian. This means looking for opportunities where others see only risk, and being willing to take positions that may be unpopular or contrarian in nature.
For example, when the market is in a state of panic and fear, Contrarian Investors often see this as an opportunity to buy into high-quality companies at discounted prices. Likewise, when the market is euphoric and overly optimistic, Contrarians may be looking for opportunities to sell overpriced stocks and take their profits off the table.
This is not “market timing”, this is Value Investing where we believe there is a CORRECT price for a stock and, when it is priced too low – we buy it. When it is priced too high – we sell it. Very simple, actually.
Ultimately, successful investing requires a combination of discipline, patience, and a deep understanding of the market. By following the 10 Commandments of Investing and allowing ourselves to make good use of a contrarian mindset, Investors can position themselves for long-term success and build a solid foundation for a happy retirement.
Happy holidays!
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- Phil
