Slow down! Great investment ideas need time to filter through.
I remember a rather wise taxi driver in Tobago, dismissing those who drove at reckless speeds around the island as being ''in a hurry to go nowhere''. That same thought often occurs to me when I feel myself slipping into 'trading' mentality, eager to sacrifice the present for the possibility of making a risky fast buck.
It is far better to slow down and take your time to make more effective decisions. Eventually profits will find you.
As an investor, you are constantly bombarded with information; up to the minute price updates, RNS announcements, bulletin board gossip, news via the national papers, television, mobile devices and so on.
At times it feels as though you can't see the wood for the trees. You just feel like acting on impulse, instead of taking time out to let some of that information percolate through your brain. That necessary stage of assimilating and digesting the information isn't wasted time, it's crucial to making good decisions.
Sir John Templeton once advised that prayer was good for investors as it enabled clear thinking which in turn produced fewer errors.
Whether you pray, or just spend time in reflection, I agree that peace of mind is essential when it comes to making good strategic choices as to where to allocate capital. When making such long-term decisions, you need to tune out the constant white noise of short-term share price movements and look at fundamentals.
Another reason to meditate is that it helps engage the creative, left hand side of your brain. It might just come up with an angle that is original and can make you lots of money.
I've had some of my best ideas while in a half-awake stage of mind, just stirring from sleep. Often it involves particular sectors, evaluating which are the best plays in them.
Of course, it is hard to relax when you've invested thousands of pounds on shares that may not be performing as you had hoped. That's why it is crucial to take the time to conduct detailed research prior to investing. If you've really done your homework, you should have faith in your reasoning.
If things go wrong after that it is easier to live with. Provided you're prepared to be patient, you can often recover most of your money.
This quote from Warren Buffett is worth remembering: "You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right -- and that's the only thing that makes you right. And if your facts and reasoning are right, you don't have to worry about anybody else."
From a purely practical point of view there are significant dangers from rushing around chasing profits and trading too frequently without taking the time to assess the situation:
- profits will be eaten up by commission charges;
- you'll needlessly let go of long-term winners;
- you don't make the time to do the necessary due diligence on a potential purchase;
- your peace of mind will suffer as you become stressed; and
- creative solutions/ideas are missing.
Here are five things that I reckon full-time investors should take time to do at least once a week:
- some sort of exercise, whether it be time spent jogging, walking or gardening;
- some sort of meditation. This can range from a full on "Om" session, a prayer, to relaxing in the bath;
- spend some quality time with friends or family;
- ensure you take the time to sit down and eat properly; and
- do something creative, whether it be reading a book, playing a game or just lying in bed daydreaming.
Don't get swept up in the maelstrom of current events, force yourself to rest. Then after your mind is clear, that is the time to make a decision and act on it. Sometimes it will be to purchase a stock, but most times it will be to avoid buying a stock!
Allow yourself time to relax and making sound decisions will become simpler.
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