When you live in a world that is struggling through a recession and investment management is all about watching markets careen up and down it can be a challenge to keep emotional control. The investor panics, reacts and makes all of the wrong decisions because he believes he is going to become statistic. He does not perceive that it is the very nature of the market to go up and down and if you look over the whole of history – markets have always fluctuated! The richest people in the world ignore the urgings to sell and hold onto their investments over the long term so that no matter what they are making money. The wise investor will never truncate that investment’s ability to make money for them by dumping it and letting it make money for someone else. It is the best investment management strategy to collect investments, not to lose them.
Investment strategy can also be all about “not tilting.” You have probably heard the word “tilting” in relationship to gambling. That is where the gambler panics when he believes he is losing in a game. He has an emotional reaction as his investment in his gambling bank roll is eaten up by a losing streak and starts to make decisions without thinking them through first. He starts acting on the wrong information and betting all of his gambling roll to get his money back. He forgets that when it comes playing any kind of game over the long term that sometimes you win and sometimes you lose. You need to be mature to handle investment management and not behave as if market swings somehow control you.
Furthermore, the “tilter” stays in losing games out of spite. He is going to show the world he can win! A wise investor knows when it is time to “fold.” He has nothing to prove. He does not stay in any type of business relationship “to see how it will turn out. “ He knows how it will turn out because he has made wise investments that despite depressing downturns or devastating headlines about the state of the economy will make money. This is because it is a wise investment management strategy to realize that one of the best indicators that his investments will be a success is when the market is in a downturn.
If you are going to be an investor it is also important to realize that this is a continual responsibility and not a hobby. Your investment portfolio must be handled by a savvy l individual who is immune to the fear, greed and misinformation that often guides big movements for better or worse in the economy. Sometimes the best candidate for handling your investments is not you; it is an investment management professional who is disciplined, perceptive and has a bit of wisdom about wealth management.
