Good habits promote success

Published 3:01 pm Friday, July 3, 2009

Among a long list of winning habits common to successful investors is the patience to let their ideas work out.

Patience is a two-sided coin.

On one hand, it can help you do absolutely nothing if the time for an investment isn’t right. On the other, you need it to give your active investments time to perform as you had expected and to avoid pulling the rug out from under eventual success, never allowing impatience to trump good judgment.

Asset allocation

Dramatic markets tend to encourage Chicken Little pronouncements. You may recall hearing that traditional profit and loss were irrelevant measures of success when high-tech firms charmed investors in the late 1990s.

Recently, you may have heard some analysts proclaiming the death of asset allocation. After all, during the current bear market, just about every type of investment lost value.

Chances are, however, the sky is not falling.

History is demonstrably a better reference than passing fads. Most analysts remain convinced that portfolios distinguished by intelligently allocated assets and smartly diversified according to risk tolerance, financial goals and a variety of other factors have the best prospects for long-term success.

Asset allocation does not ensure a profit or protect against a loss.

News of the day

Steel yourself not to be unduly swayed by the sensational news of the day.

Market prospects seem bright one day, dim the next. Wise investors listen, but rarely are moved to act.

Certainly, if one of your investments is suddenly imperiled, the news can alert you to pay attention to whatever is going on. Is your dividend payout going to be severely reduced?

Is a merger or takeover rumored?

In such a case, listening to the news may be to your benefit. Generally, however, acting because of opinions shouted out over the airwaves or headlined in large type can be detrimental to your long-term financial health.

Principles, passion

Certainly investing according to a carefully constructed foundation of financial principles is a component of success, but so is the passion for the very idea of investing.

Successful investors enjoy the details—studying charts and financial data, learning what makes an investment idea worth considering.

Such investors relate world events to what they own, always trying to keep their risk at a minimum. Investments are not forever, so they have an exit strategy and are prepared to execute it when necessary.

Although they can be broken into different segments, the principles that guide the most successful investors boil down to applying intelligence and perspective to all your investments, paying attention to the markets without fussing with your portfolio on the whim of the day, and being brutally honest concerning your risk tolerance, your financial goals, your judgments, and your losses and gains.

If you would like to discuss any adjustments you need to make to your retirement portfolio, please give me a call.