It would be nice if investing worked like one of those change sorting machines you find in grocery stores. You pour in the random odds of and ends of your available money and, after some churning and grinding noises, it spits out a tidy sum in a wonderfully usable cash.
Unfortunately though, those machines don’t make money for you and the forces that “churn and grind” inside the investment machine move fast, change constantly and are extremely complex. But, there are ways of looking at investing that can simplify the process.
3 Foundational Elements of a Simple Investment Philosophy
A philosophy is like a filter. Once you find something you believe to be true about a particular aspect of life, then all of the forces, complexities and uncertainties pertaining to it can be run through that belief in order to bring clarity and prepare you for action. This is true in investing. A functional philosophy can be a filter for the many volatile realities that shape investing. Here are a few components to a healthy philosophy.
1. Be Patient
We humans don’t like to take our time. Especially in something like investing where the opportunities to make your money into more money seem endless. But, acting impulsively with your money can prove disastrous. While you don’t want to suffer from “analysis paralysis”; letting your uncertainties keep you endlessly weighing options without ever acting, don’t be afraid to take some time to understand where your money is going. With only a quick glance, almost every company and opportunity can seem inviting. Don’t be afraid to take some time to dig deeper. It’s important to do further research on what interests you, whether that’s managed investment trusts or entity services, and go from there.
2. Be Bold, But Don’t Gamble
Gambling is incredibly enticing! Watching that ball spin around a roulette wheel causes an adrenalin rush and if you are lucky enough to have the ball bop, spin and land on your number, there is unmatched excitement. But, luck is a dangerous thing to rely on when it comes to investing. There is no way you can eliminate risk when investing; it is impossible to predict the future. But, you can eliminate the risk of incurring financial damage by coming up with the amount of money you can safely invest, and sticking to it. Once that amount is determined, don’t be afraid to be brave! Investing is not for the timid. Do your research, weigh your options, consult with knowledgeable people and launch out into sound money-making opportunities.
3. Learn from Your Successes… and Your Mistakes
It is easy to learn from your successes. Success is easy to “hang out” with, to think about and to dissect. Mistakes, however, are difficult to spend time with; but it important to analyze both. The famous basketball coach, John Wooden said, “If you’re not making mistakes, you’re not doing anything.” It is a painful truth that one of your most effective teachers is your mistakes. Experience the joy of truly knowing why an investment worked and have the courage to fully understand why one didn’t. Both will make you a stronger investor.