“As an investor, you are aware that there are costs to managing your own money. But there might also be implicit or “hidden” cost that you should consider–like missing opportunities or holding on to losing stocks” — Paul Ebeling
If your investment portfolio is not delivering as expected, ask yourself whether you have these 4 traits in abundance: time, interest, discipline and expertise, aka TIDE.
So, let’s talk about why the TIDE traits are important, as follows:
High TIDE Vs Low TIDE
- Time is one of the most vital traits. As traders and investors, we must consistently dedicate enough time to execute our plans.
- Interest is equally important. You need to want to spend the time you have available on managing your money. Should your interest in investing fade over time, it is likely your results will fade as well.
- Discipline helps you stick to your plan in the face of market volatility or other events. To be disciplined, consider:
- Screening: As you look to add new positions, what are the criteria you use to come up with a list of candidates?
- Researching: As you look to narrow down your list, consider using both:
- Fundamental analysis: How is the company doing as a business?
- Technical analysis: What is the trend in price of the stock? When to buy or sell.
- Establishing buy and sell rules: As you look to place a trade, identify how much you will buy and how you will buy it. Identify how you will cut losses and capture profits.
- Monitoring: Determine how often and in what manner you’ll review your portfolio.
- Expertise is as important to managing your long-term investments as it is to managing your trades. There is no shortage of resources available to help you get better at investing, whether you are looking to add to your understanding of a new asset class, sector, retirement strategy or other subject. But, you have to want to put in the learning time.
Now ask yourself the following Big Qs:
1. Are you making goal-based decisions?
Establishing clear financial goals and creating a plan to achieve them is our 1st investing principle at HeffCap. When you do not take the time to write down your financial goals and how much savings it will take to achieve them, you are less likely to stay on track.
2. Have you determined your exit points?
Another of HeffCap’s investing principles is to build in protections against significant losses. With trading, we emphasize the importance of having a sell discipline or setting specific exit points for selling a stock, which can help guard against losses. Emotions such as Fear & Greed can rule people’s longer-term investing decisions, if we let them.
Fear can force us to make ill-timed decisions that derail our financial plans.
Greed often pushes us in the opposite direction, causing people to take too much risk or load up on concentrated stock positions hoping for a 4 bagger.
For example, without a sell discipline, you may be holding on to losing stocks, which may not only may cost you in the short term, but you may not reach your financial goals over the long term.
3. Do you have a diversified portfolio?
Building a diversified portfolio and rebalancing your portfolio on a regular basis are 2 other HeffCap investing principles–are proven methods that help investors reduce volatility and stem portfolio declines.
Meanwhile, regular rebalancing keeps single investments or asset allocations from having too much influence in your portfolio.
Each of these tasks takes time, interest and discipline, along with a commitment to getting better at it by developing a routine, i.e., expertise.
Find your pace
If you have the TIDE qualities that enable you to help reduce those indirect costs of investing, then you are at a Key starting point to realizing your financial goals. But if you find yourself struggling to find the time, stay interested, remain disciplined or lack expertise, you may want to or should:
- Update your goals with the guidance of a savvy Financial Consultant
- Schedule an annual portfolio check-in to determine whether you are on pace
- Invest a portion of your portfolio in a managed solution with HeffCap.
Have a healthy week, Keep the Faith!