Understand Yourself before making that Investment Decision

When it comes to investing, a lot of people tend to forget one thing - they aren't absolutely sure what kind/type of investor they are.

Regardless of the varying investment philosophies that we advocate to, we are all synchronised with the identical set of emotions that investment subscribe us into - that is, Fear & Greed.

What separates us (Investor), in my opinion, is the management of this set of emotions. The quality of management arguably determines/affects the timing that an Investor enters (buy) and/or exits (sell) the market.


"Be greedy when everyone is fearful, be fearful when everyone is greedy" - Warren Buffet

I am sure most of us (if not all) could fully appreciate this quote, albeit inculcating this into our daily investment decisions is possibly, but, another different story. From his quote, I also like to think that Mr. Buffet agrees that emotions is inevitably involved when it comes to investment.

If you haven't realised that I had already attempted to highlight this through the header of my sharing, I would like to emphasise here that you should start asking yourself: What type of investor are you?

Do you prefer income over capital appreciation?
What is your investment time frame?
What is your expected return?
How would you anticipate your course of action to be when your portfolio dip by 10/20/30%?

The above is only a sample set of questions, when answered, aid to deduce the type of investor in you. It is not limited to these examples, and definitely not meant to be exhaustive as well. But to a certain extent, it would probably give you a better evaluation after these questions have been answered. And before that, your expectation and emotions could arguably be misguided.

So in order to avoid making "emotional" mistakes in investing, I suggest doing this:

1. Be Diversified - Own asset classes that have very minimal correlation;
2. Adopt asset allocation in accordance/alignment to your risk profile;
3. Allocate "Reserves" to "capitalise" on market sale, ie. enter when prices are lower;
4. Determine your investment time horizon. If it is to be 10 years, whatever happens this week is just "noise";
5. Work with a Financial Advisor to assist you in monitoring your portfolio and offer you advice.

Whilst the above list is not meant to be exhaustive, I think it still serves as a rather decent start. But if that still poses a challenge to your time, then at least have a trusted advisor!