Legendary college basketball coach John Wooden once said something particularly applicable to long-term investing strategy when he said, “What’s important is what you do once you know what you are doing.” Investors cannot control the market returns, but they can impact their cost to access the markets and they can work to control their own behavior.
Investment costs have received a lot of attention in the past few years causing many investors to consider the stated and hidden fees associated with operating their portfolios. Owning securities for the long-term could be compared to running a business. All things being equal, the greater returns go to those businesses that can deliver a quality product for less cost than their competitors.
Investor behavior can be a significant factor in the long-term results of the individual investor given the daily exposure the public has to the financial press and the general news media. The uncertainty generated by the media onslaught can tempt even the seasoned investor to buy when prices are high or sell when they are low to the detriment of their ultimate financial goals.
One valuable tool to assist the individual investor is to establish a financial strategy you thoroughly understand that you do not change based upon the daily news cycles. Plan ahead and buy low-cost quality investments. Expect the markets to vary every day and stay on course in volatile times even if you are currently taking income; if you have your math right, ignore the media and carry on.
Discipline can be a very difficult thing to maintain over the decades you spend working to accumulate funds for the future. If you aren’t willing to cancel your newspaper and give away your television and computer, one way to acquire the discipline for the long haul is to hire a qualified investment professional committed to your best interests and trust their guidance as a substitution for your own.
The famous investment guru Benjamin Graham is quoted as saying, “Money is like a bar of soap, the more you handle it the less you have.”
All investing involves risk including loss of principal. No strategy assures success or protects against loss.