Posted by Phoebe Chamier on 29/11/22
Do you need extensive knowledge of the financial markets in order to invest successfully? While it can certainly help, there are other attributes of a great investor that can get them quite far. For me, two of the most important are patience and perseverance.
Patience is a virtue
A smart investment is a long-term investment. You can effectively reduce risk and navigate through the ups and downs of the market by adopting an investment timeline of at least 5 years, ideally more.
Investing your money into a well-diversified strategy for 5+ years allows you time to ride out whatever market turbulence. The more time you're able to commit to your money, the more your risk is reduced.
Buying low, selling high is harder than you think
It’s tempting to try and time your investments around the peaks and troughs of market activity, to buy low, sell high as the old rule goes, but by trying to miss the lows, you’ll probably miss the highs too. This is because the best and the worst days of the markets are often grouped very closely together. Instead of watching market prices dart up and down, and constantly trying to catch a great entry point, it’s easier and more prudent to buy and sit tight.
This might feel easy to do when markets are optimistic and prices steadily rise, but our patience can be tested at times of market volatility. Events like the COVID-19 outbreak, cost of living crisis and the Russia/Ukraine war have rocked markets, and often our confidence with them. It’s tempting to cut your losses but during these uncomfortable times the shrewdest thing you can do is muster patience, remain invested, and ride out the storm.
When the going gets tough, the tough persevere
In tough economic times it can be easy for investors to lose their nerve, but a good investor will persevere.
Committing to saving a small amount regularly, no matter what the state of the market, can be a savvy move. This strategy is sometimes described as ‘pound cost averaging. The ‘pound cost averaging’ approach to investing can feel like less of a rollercoaster because you'll commit to adding to your portfolio come rain or shine. You'll generally achieve the average price over your chosen investment timeline without the stress of committing a large amount of capital at any particular time.
So there you have it. Patience and perseverance. Two qualities that, when adopted alongside a well-diversified, professionally constructed portfolio will give your investments the best chance to bloom.
No rocket science, no algorithm, no magic, just wilful consistency.