Portfolio Tracking
It is normal that an investor would want to constantly monitor his or her investments. However, an excessive monitoring isn’t advisable. Daily tracking your portfolio and getting diverse opinions from various sources concerning the markets and particular asset classes each day have some peculiarities. Bear it in mind that articles, podcasts and blogs most times have different opinions and their authors may not be able to give specific advice for your own situation.
There will be a daily fluctuation of your portfolio and so you should try no to make any crucial decision based solely on this market movements. You tend to find it emotionally challenging when the market is negative. In fact, you may be tempted to make a vital decision based on your current emotion rather than solid advice. Do not attempt to place a time frame on the markets. You cannot possibly predict the stock price top until the time it declines.
You do not have to be afraid to put your money into markets if you believe they are performing really well. Also, do not be afraid to sell a loser. You do not have any way of deciding whether or not it will bounce back and you shouldn’t make that the basis of fear around investing or your portfolio.
Warren Buffet also offered some investment tipsfor new investors.
1. Diversification isn’t always the best idea
While a lot of good investors talk about how important diversification is, Buffet isn’t in total agreement with the idea. He said that diversification ought to be for those who have little idea about investing. To him, an investor with experience should select stocks on long–term basis and also keep faith in that investment.
He said a lot of investors are for portfolio diversification because they fear that a stock might cause the entire portfolio to sink. However, he said doing that would make it more difficult to track the events that could possibly affect each company. While it is true that diversification helps in the reduction ofportfolio volatility, but it also means that it reduces how well they can focus on each investment.
He mentioned that he personally waits for any opportunity to invest in good stocks and he takes complete advantage of such opportunities.
2. Invest in yourself
Buffet said that investing in one’s abilities is actually the best form of investment. Anything that can be done to help you develop your abilities has the probability to turn out more productive. He said a lot of people will not make the large chunk of their money off the stock market but rather from their respective careers. As such, it is important to invest in one’s self.
Charlie Munger, his partner also expressed a similar thought. He said his secret to success is selling yourself for one hour daily and using that hour to get better.
3. Trust your investment choices
Buffet said that trusting your investment decision is actually very hard. A lot of times, people think they are wrong while other people are right. Rather than having that belief, he advised studying and believing in yourself.
He said to turn out successful, it is necessary to first overcome fear and also learn to reduce the attention given to what other people are saying. Gather knowledge and move to make your investment decisions based on your own personal understanding.
4. You should invest in what you understand
He said that a lot of people tend to overthink whenever they want to make an investment. He cautioned people never to invest in a business that they do not fully understand. He added that before he makes any investment in a company’s stock, he first tries to understand how exactly that company makes money.
He also tries to know the major factors that affect the company’s industry under ten minutes. If it isimpossible for him to get that done within that time frame, he proceeds to another company to evaluate on that same basis.
He said even with data, it is quite impossible to carry out a future prediction with full accuracy.
Buffet, who is the CEO of Berkshire Hathawayadvised that in any situation where majorreliance is on forecasting the future accurately, one should desist from investing. If one finds a business to be too complex, then he advised getting another business to look into and invest.
He reportedly said that before considering valuation, he would only have interest in just about hundred companies out of nearly 10,000publicly traded companies.