1) Investing Requires Taking Risks Nothing is risk-free.
Even passbook savings and bank CD’s carry their own special kind of risk. It’s tough to live off of your interest payments in a 0% interest rate world. Investment success depends on recognizing and controlling risks, without closing yourself off to realizing reasonable returns. But that just doesn’t happen in a vacuum. You need a viable investment plan that you understand and will stick with. It’s important.
2) Emotions Destroy Wealth The stock market can move suddenly, in either direction, without warning.
These moves are random and often make no sense. So how do you, within that chaos, keep your investment focus? Get your asset allocation right. The biggest destroyer of wealth over time is emotion, which often leads to reacting at the wrong time and panicking. The right asset allocation helps keep the emotions in check. The right allocation will help you to remain disciplined, committed and ultimately will “get you there”. It’s important.
3) Be Comfortable Doing Nothing When Nothing Is Called For The pressure to act can be overwhelming when the markets and the world seem to have lost their collective mind.
“Something has changed, what are you doing about it?” Doing nothing can be seen as lazy, negligent, or incompetent – when often it is the best course of action. Sticking to your principles, plan and discipline sounds easy, but the behavioral realities of investing means that this is far from the case. You see, doing nothing (when nothing should be done) is hard. Sometimes, it’s really hard. But… It’s important. So, when the world seems to be going crazy, and it makes you want to huff and puff and blow your house down… Just Don’t. It’s Important.