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“The art of being wise is the art of knowing what to overlook.”
— William James, American philosopher & psychologist (1842 – 1910)
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Adrian Mastracci, portfolio manager at KCM Wealth Management, says “Stickhandling the preservation and growth of personal wealth works best on logic, not on emotions." |
Vancouver, BC (January 02, 2008): Markets spend about two-thirds of the time going up and one-third going down. Many new year resolutions deal with how to become better investors in 2008.
Adrian Mastracci, portfolio manager at Vancouver based KCM Wealth Management says, “There are plenty of investment lessons to be learned from analyzing market turmoil. Stickhandling the preservation and growth of personal wealth works best on logic, not on emotions.”
The good news is that becoming better investors is not that complicated. I’ve summarized ten salient pearls of wisdom. Each one helps guide the portfolios. Together, they make a very powerful team.
10 pearls of wisdom
Here is my lineup of investment wisdoms. The ones that should not be overlooked:
- Patience is a wonderful trait as stocks deliver results in the long run.
- The mythical highest return for the least risk is just that – a myth.
- Broad diversification is essential medicine to control the impact of risks.
- The appeal of achieving quick financial payoffs causes investors to focus on the wrong issues.
- Dwelling on past investment mistakes creates even more future mistakes.
- A simple game plan improves the chances of investment success.
- Every portfolio ought to own some boring fixed income.
- Rebalancing occasionally maintains a more stable exposure to risk.
- All good trends come to an end, so it’s consistency of returns that really counts.
- Never make investment decisions based only on tax implications.
The secret to managing wealth is not that much of a secret. It’s really a large dose of managing the risks!
Which brings me to the question of what should investors expect in 2008?
Peering into 2008
Overall, I think 2008 is a time to stay cautious. Global economies are juggling many things. Some are bound to fall hard. Especially as the markets have delivered a bull run for over five years.
The markets will continue to be driven by the US housing plunge, fearful credit markets, more billions of losses coming to light, energy costs remaining high, renewed threats of inflation, potential damage from mortgage resets and foreclosures. Not to mention risks of a recession.
Apply the ten wisdoms throughout 2008, and beyond. They represent a large dose of proven investment strategies. Minding the portfolio’s exposure to risks pays off. Chances are that the bull market has skewed portfolios heavily into the equities camp.
I have an unease about the amounts of daily market volatility. 2008 is a year to park all investment emotions at the door. A year not to chase returns. Not fretting about the ones missed.
It’s a year to maintain simplicity. Making logical and rational decisions with the facts at hand. I expect risk management to test and retest all investor resolve. Over and over. This is where the game is won or lost. Even for the professionals.
However, I also expect that there will be some opportunities to buy quality investments on sale. Perhaps, at various times during the year. I suggest keeping some cash on hand for the sales. That large dose of patience will come in handy. Do remember that sales are often short-lived.
I’m prepared to hold quality investments bought on sale. Prices may go lower after a buy. My belief is that investors who buy on sale should be happy down the road.
Bottom line. I see 2008 as a year of opportunities for the strong willed. Knowing what to overlook helps along the way.
I have scribed my list of potential purchase candidates. Let the markets unfold. Better investing to all.
I welcome your comments.
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