Investopoly My investment philosophy is based on 4 principals. What is your investment philosophy?
I was listening to Morgan Housel’s new podcast recently (which I highly recommend by the way), and he said something along the lines of; once you define your investment philosophy, you won’t be distracted by any noise that doesn’t align with it.
It really resonated with me.
Success with investing is more about avoiding mistakes than anything else. Therefore, having a clear, well-defined (evidence-based) investment philosophy will help you avoid getting distracted by any unhelpful ‘noise’, and keep you on the on the straight and narrow.
However, if you don’t have a well-defined investment philosophy, the risk is that you’ll be easily influenced and make financial mistakes.
I thought it might be helpful if I shared my investment philosophy which I can solidify it into four principles.
Principal 1: Short term returns do not help you achieve long term goals
You must align your investment decision time horizons with your goal time horizons.
Most people have a long-term goal of enjoying a comfortable retirement. Retirement will last two to three decades, hopefully longer. Therefore, you must align your investment decision making with that time horizon. That is, ask yourself what the best investment is you can make today that will maximise your wealth in 10, 20, 30+ years from now.
Short term returns do not create long term value. Let me share an analogy. If you operated a business, your long-term goal might be to create a sustainable and profitable business. Of course, you could reduce the price of your product for the next few weeks (offer a discount) to generate more sales this quarter. But that comes at the cost of creating long term value because it cheapens your brand and trains your customers to never pay full price. However, creating brand value might not improve this quarter’s results, but if you do it consistently, you are well on your way to deriving long term value.
The challenge with becoming a successful investor is that good, long-term investments just take time. That means investors must have a strong tolerance for delayed gratification – forgoing some wealth today for a lot more wealth in the future. As Warren Buffett says, the market is very good at transferring wealth from impatient to the patient (paraphrasing). There are no shortcuts to generating long-term returns. You just need to be patient.
Do you have a question? Email: questions@investopoly.com.au or for a faster response, post a comment on the episode's video over on YouTube: https://www.youtube.com/@investopolypodcast/podcasts
If you're interested in working with my team and me, discover how we can work together here: https://prosolution.com.au/prospective-client/
If this episode resonated with you, please leave a rating on your favourite podcast platform.
Subscribe to my weekly blog: https://www.prosolution.com.au/stay-connected/
Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog: https://prosolution.com.au/books/
DOWNLOAD our 97-point financial health checklist here: https://prosolution.com.au/download-checklist/
IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.