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| Adrian Mastracci, president of KCM Wealth Management, says “Managing money is a long-term assignment. Invest in quality within a broadly diversified asset mix. Try to avoid large losses." |
Vancouver, BC (February 13, 2006): Many investors believe that investing success is not easy. Then there are those who see it differently.
Sir Francis Bacon, the English philosopher, in a speech four centuries ago: “The good things which belong to prosperity are to be wished, but the good things that belong to adversity are to be admired.”
Adrian Mastracci, “fee-only” investment counsel at Vancouver based KCM Wealth Management, comments, “Successful investing often echoes the sage words of Sir Francis Bacon. It’s not always simple, but investors can make it an easier road to travel. Less adversity, more prosperity.”
I summarize investing success in 20 words:
“Managing money is a long-term assignment. Invest in quality within a broadly diversified asset mix. Try to avoid large losses.”
That’s it. Short and to the point. These are the core values. The ones that consistently deliver time after time.
My three wise lessons firmly embrace the long-standing foundations of investing success.
So how can investors improve their investing? Let’s dig deeper into the three lessons.
1. Long-term mindset
There is a right way and a wrong way to invest. The right way allows time to work its magic for each investor.
I believe in considering risks first, returns later. That builds prudent portfolios. The goal for each investor is to be comfortable, as well as to seek a good return.
Get in the habit of asking where your portfolio will be in five to ten years. Not in six to twelve months. Managing the finances is definitely a long-term mindset, not an event.
Every investor is unique and needs unique treatment. Investing is about setting a course of action to achieve a personal rate of return to reach those aspirations.
If you focus on the near term, say less than two years, you’ll encounter many unpredictable events that can affect portfolio outcomes. Even with professional advice.
Dream a little or a lot. Ask yourself what you want the future to look like for you. Then concentrate on proven long-term strategies before any tactics.
2. Broad diversification
I don’t know where the markets are headed. I don’t know which sectors are going to be sizzling hot. I don’t know which stocks are going to hit home runs.
More important, I don’t care that I don’t know. You shouldn’t care either. Nobody else knows, so we’re all in the same investing boat.
However, what I do know works very well. It has served nicely for ages and I am confident that it will continue to do so.
I design serious money portfolios with quality investments. Broadly diversified among various geographies, sectors and asset classes. All within a mix of equities, fixed income and cash instruments that each investor is comfortable with.
You can say that’s boring. And you would be right. But boring is beautiful when it comes to long-term portfolios, thank you.
Put the excitement in some other part of your life. I’ll stick with the dull and boring, well-diversified portfolio. I’ll be right more often than wrong.
You heard that correctly. I’ll be wrong some of the time. That’s alright. It’s part of the investing experiences.
I accept that premise. You should too in your investing. Broadly diversified portfolios save the day.
3. Clip losses early
This is by far the hardest of the three lessons. Simply said, try your best not to take a large loss. Little ones are far better.
Say the value of your equity portfolio gets clipped by one-third. You need a 50% upside just to get back to breakeven. That’s a steep hill to climb.
The first two lessons help avoid serious losses. However, if one is about to happen, take the medicine early and swiftly.
Be totally dispassionate about your investments. No emotional attachments please. The investments don’t feel a thing. Every loss always starts out very small.
Don’t sit idly by, hoping to be right about your losing picks. Instead, do the right thing. Stop the bleeding and move on. No second guesses.
My three wise lessons assist in bringing discipline to your investing. The essentials for the long and winding road ahead.
Resolve to make the road to investing success easier to travel. Just three painless lessons help pave the way there.
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