Are you freaking out about your investments right now?
Compulsively checking your phone…
Pacing the room…
Doom-scrolling endless headlines about bank collapses and inflation rates…
Even — God forbid — considering selling all your investments and waiting for things to calm down?
If that’s you, chances are you don’t have something that separates the great investors from the vast swathes of the mediocre (and worse).
This thing is free and widely available.
And yet, too few of us understand its importance and value.
While the panicked and fearful don’t choose it, use it and benefit from it…
The calm and confident are reaping its rewards right now.
I’m talking about strategy.
Investment strategy helps you eliminate emotional decisions and gives you freedom from stress.
Well, relative freedom, shall we say — compared with those who buy and sell based on emotion, for example.
Here are three problems you’ll solve by employing a clear investment strategy.
1. Emotional decisions = emotional reactions
Back when I started investing, I had no idea what I was doing.
I remember buying into investments, only to sell out of them within a couple of weeks.
(And paying trading fees both ways…)
I’d get ‘tips’ from colleagues at work, or ‘ideas’ from online forums.
Ultimately, I couldn’t hold on to anything long term. Because I would freak out and sell. Because I didn’t know why I’d bought in the first place, basically. Because I had no strategy guiding my decision making.
But once I had a strategy, this completely changed.
Because now it wasn’t up to my emotions whether I should sell a stock or not.
It was up to the strategy I had selected — and the criteria for decision-making that commits me to.
Did it meet the criteria for selling? Then I sell.
Otherwise, I’m holding on for the ride.
With my strategy, I don’t worry about such decisions.
I chose my strategy so it can guide my shorter-term decisions.
Choosing a strategy is another subject which I’ll dive into in a later newsletter.
2. Bad Moves, Made For Bad Reasons
The next thing that a strategy helps with is helping you choose the right investments.
It doesn’t matter when you buy or sell if the company you bought into is no good.
Think about these two questions.
Buy the stock because a friend told you it was a good idea?
Or…
Buy because you have a set process that you filter any investment through?
Which do you think will lead to the better outcome?
Having a strategy that helps determine what you buy is crucial.
That way, you can constantly improve your strategy, based on set criteria, rather than making it up as you go along.
3. To Be Underprepared Is To Risk Underperformance
Ultimately we all want good performance from our investments.
We want our money working hard for us while we sleep.
As with anything in life, not having a plan, is planning to fail.
Having a strategy helps keep you on the right path.
Even if that path turns out to be the wrong one, having a consistent strategy helps you figure that out fast.
Which means you can then pivot to one that works better for you.
This means you can achieve optimal performance as quickly as possible.
If you have no strategy, you may never figure this out.
To sum up…
Strategy & Success Go Hand In Hand
Choosing and committing to a clear investment strategy will:
- Reduce/remove stress
- Help eliminate emotional decision making
- Help you choose better investments
- Help improve your investment performance
Find a strategy that works for you.
There’s quite a few out there. You’ll know the one for you when you find it (and especially when you start seeing the results).
From there, you can rest easier about your investments, knowing you’re investing according to a plan.
Knowledge pays the best interest,
Navarre
The Data-Driven Investor
