As famous investor Warren Buffett said, investing is simple, but not easy.
Novice investors may feel daunted by the huge amount of information out there that threatens to overwhelm the senses.
Even after sorting through what is relevant and what is not, there is understandably still a lot to learn.
If you want to achieve a decent level of proficiency, there is no shortcut to constantly learning and reading.
Veteran investors may also make silly mistakes at times as we are only human.
Hence, if you wish to become a better investor, you should not only learn from the best but also look inward into your psychology.
Here are four aspects that you should take note of if you want to improve your investment process and level up your acumen.
Accepting that you are human
Remember that no one has all the knowledge in the world.
Along the same line, it is also impossible to predict what will happen in the stock market as the business world is too complex.
Hence, we must accept that we may sometimes make mistakes and that some of our investments may fall short of expectations.
The key is to take this in stride and not let obstacles and stumbles make you give up investing altogether.
The journey may be tough, but it takes tenacity and perseverance to push on to reach your retirement goals.
By accepting that you are not infallible, you will also be at peace with yourself should investment results not go your way.
It is important to remember that markets can be volatile in the short run, meaning that investment returns may be subject to significant near-term volatility.
Companies may also fall by the wayside even with the best of intentions as the business world evolves.
The key is to be flexible in your thinking and to embrace change rather than be fixated on ideas that may become antiquated with time.
Understanding and controlling your emotions
With significant amounts of money involved, investing can wreak havoc on your emotions.
Just ask anyone who has either gained or lost a chunk of money in the stock market.
Chances are they will be feeling either euphoria or regret, respectively.
There is a whole laundry list of psychological biases and fallacies that investors are constantly subjected to.
These pitfalls threaten to constantly trip us up and lead us to make erroneous or sub-optimal investment decisions.
Being aware of these psychological traps is a good first step.
Next is to understand yourself better and know what triggers you and causes an emotional reaction.
Ask yourself a few simple questions – do you panic if you see the value of your portfolio plunge by 10% in a day?
And will you eagerly sink money into an investment just because everyone else is doing so without first doing your research?
By understanding your behaviour and psychology, you will then have a better idea of how to improve your investment process to achieve better results.
Having a long-term investment horizon
Rome wasn’t built in a day.
It is unreasonable to expect your investment portfolio to generate superior profits after you have invested for a short time.
Patience is needed to enjoy the fruits of your investment labour.
Firstly, companies need time to execute business strategies and to grow.
Secondly, time is also needed for you to slowly allocate funds into your investment account to compound your wealth.
Therefore, the process of investing should be a slow and steady one, in contrast to gunning for quick gains.
By adopting a long-term view, you can ensure that your portfolio grows steadily as you allocate more money to it and reinvest the dividends that you receive.
It can be tough to hang on for the long term when share prices may fall sharply in the short term.
But remember – if the business is doing well, the stock will surely follow.
So, start monitoring the business and ensure that you have invested in those with strong competitive moats.
Then just sit back, relax, and wait for the rewards to flow in.
Learn from your mistakes
A final lesson is to constantly learn from the investment mistakes that you have made.
Being humble means that you remain open to being wrong sometimes as no one is infallible.
There is no shame in admitting that we may sometimes may poor investment decisions.
Rather than dwelling on how silly such mistakes are, you should turn the situation around and see what lessons you can learn to avoid repeating such mistakes.
In this vein, it is recommended that you keep an investment journal to chronicle all your decisions and any mistakes that you make along your investment journey.
This journal serves as a useful reminder of how we can go wrong and it can prevent you from committing the same errors in the future.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.