One of the most difficult things to do as a human being is to walk your path without being diverted or discouraged by other people’s opinions.
When you were young, your choice of clothing and music was influenced by your friends. As you got older, more important decisions such as where you went to college and what career you chose, were all influenced by others. Investing isn’t any different.
These days, people are trying to capture lost opportunities – they want to make up what they lost during the 2007 – 2009 market drop. As a result, people who intellectually agree that it is NOT a good idea to use the TV talking head’s market outlook to determine their next investment move find themselves unsettled by a friend’s recommendations to sell their stocks and put the cash in silver and commodities.
But time and experience have taught us that successful investors work from a philosophy vs. an outlook on the market. People who work from a market outlook are reacting to the events around them, the opinion of their friends, and the news; which ultimately creates a very confused and directionless investment plan.
An investment philosophy dictates how much risk you will take, when you will buy, when you will sell, and what you will hold. This philosophy should be based on your personal goals and objectives, and what you are trying to accomplish in your lifetime and beyond – not what Fox news or CNBC is telling you today.
As we head into the wedding, graduation and golf season, and your discussion with friends turns to investing, ask them – “What’s your investment philosophy?” You’ll probably be met with blank stares. If they don’t have a coherent philosophy for investing, they probably don’t know what they are doing, and they certainly shouldn’t divert you from your path.