2018 is turning out to be a difficult year for many among us.
Most investors have not seen their portfolios stay above cost. Most portfolios have lost money. This very much applies to mutual fund portfolios as well. In fact, the losses seem to be higher for later entrants into mutual funds investing. This is especially true of those who entered in the second half of 2017 and the first half of 2018. The losses are largely notional if you are an investor, and real if you are a speculator. But losses are losses. And, we need to find a way out of these losses.
This podcast will try and identify ways and means to come out of losses. Let us develop five mantras.
1. TAKE STOCK.
You may have built your current portfolio in the last two years. Your investments choices were fashionable at that time. Markets fancied them. You were told that those choices were the best. But now, things may have changed. Today’s choices and tomorrow’s winners may be very different. So, you need to understand your investments. Take stock. Understand if what you own now will perform well in 2019 or if they are not likely to.
2. GET YOURSELF A FINANCIAL PLAN
Most investors don’t have a financial plan. Though they are investing to meet retirement needs, they seem to be random in their approach. There is no clear goal, well-defined method, investment discipline and regular review. These are much needed and not every investor has the time and knowledge to ensure these aspects are taken good care of. A plan will help you take care of everything. So get a financial plan and make your wealth creation work better.
3. KEEP CASH.
Cash gives you the power to take advantage of market volatility. Keep adequate cash to ensure that you are well prepared to buy when the markets dip sharply. Invest gradually and scale up newer ideas progressively.
4. EXIT MISTAKES.
Most investors fail to walk out of their mistakes. Instead, they sell their winners to hold onto losers. Much worse, they average down losers. There is an urgent need to exit past mistakes. Know how to identify them. Take professional or peer help to ensure this is done diligently.
5. BET ON THE FUTURE.
The future may be very different from the past. Market context is dynamic. Your choices and portfolio construction must now be clearly aligned to the future. So, make sure you are buying tomorrow’s winners. Understand that not all of yesterday’s winners have a great tomorrow. Tomorrow’s winners could be new and very different companies.
If you follow these five mantras, you can be sure that 2019 will be a much better year. Importantly, you will be able to face volatility with greater confidence and conviction. Such confidence and conviction will lead to investment success in 2019.