Volatility. Weak investors are scared to death of it. But, smart investors love it. We’re in one of the
longest-running bull markets in history. Are you ready? If you want to get rich while the gettin’s good,
here’s what some of the best, and brightest traders are doing right now to take advantage of it.
Stop Watching T.V.
First of all, if you’re watching T.V., you’re not investing. Seems so obvious, but it’s a point that a lot of
investors don’t really “get.” According to expert trader, Tim Sykes, these kinds of behaviors are what
keep amateurs from realizing their true potential.
And, you shouldn’t even be watching so-called experts, financial planners, and radio and T.V.
personalities. They don’t know how to invest. In fact, many of them don’t have a financial plan
themselves, and don’t know the first thing about managing money.
Think Big Picture
This is another thing most people have a problem doing. The longer your investment time horizon is, the
more likely you can ride out the current and future financial crises. And, you can “buy in” when the
market “dips” and goes through one of its infamous corrections. People today expect to live to at least
80 years of age. So, someone in their 20s has an investment time horizon of at least 60 years. And,
people in their 40s still have 4 decades. While past performance doesn’t guarantee any future earnings,
stocks over the long term have historically been consistent winners for most investors.
And, it’s been that way since the late 1920s.
If you’re in your 20s and 30s, you shouldn’t be all that concerned about volatility. You have decades to
recover from a temporary drawdown in the markets.
On the other hand, if you’re older, say in your 50s or 60s, you don’t have as much time to recover. So,
you should be more concerned about market corrections. You can’t afford a huge correction right
before retirement.
As a general rule, you can determine where you should be invested by subtracting your age from 100.
The resulting number tells you how much to invest in stocks. So, if you’re 50, you can invest 50% of your
money in stocks and 50% in bonds. If you’re 60, you would split 60/40, stocks/bonds. If you’re 30, you
might split 70/30 in stocks and bonds, respectively.
Make a Sound Investment Plan or Policy Statement
Most investors need an investment policy statement. You should always have one for a portfolio that
you intend to manage yourself. It’s a blueprint for how you will invest, how much will be put in stocks,
bonds, and cash given your time horizon, risk tolerance, and investment goals.
This way, it’s your statement, and not your emotions, that govern your investment choices. The
statement, not your emotions, govern your decisions to buy and sell, and it’s your statement and not
your emotions that tell you when you should retire and how to take income from your savings.
Stephen Griffin works as a stockbroker with a long background in trading and finance. He enjoys sharing
his insights and knowledge on blogs and for a range of finance sites.
