Newsletter • Quarter 4 • 2023
A simpler approach to investing
If it is difficult to predict the future accurately, then how should one go about investing?
The simplest approach is the best
- You should understand what you are investing in.
- You need to understand how long you should invest your money in a portfolio.
- You should know how much an investment can decrease over shorter periods. A shorter period can be as long as five years and sometimes even longer.
- You should remember that few investors can adopt a long-term investment horizon and some of the better opportunities in the market will require your patience.
- You have to be comfortable with the amount of money that you may lose over a shorter period, even if the long-term return prospects of the portfolio are higher. If you are going to fret about losing money in the short term, rather choose a portfolio that is less risky. This, however, comes with its own added risk, particularly when you have a long-term investment horizon.
We believe that investing according to risk appetite gets too little attention. Arguably, the worst investment you can make is one that is too risky for you – the chances are that you will abandon the strategy at the worst possible time, and you will have had to cope with significant stress in the lead-up to this.
Keeping investment costs low
Saving 0.5% in investment costs each year (which does not sound like a lot) will give you about a 4% to 5% higher benefit 10 years later.
Some will try to argue that their cleverness makes it worth paying them more. Maybe, but they need to be much smarter than a large universe of skilled investment professionals who are also trying to beat the market.
We believe that following these simple rules is an excellent strategy for managing your money, rather than trying to predict the market.
Successful investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time.