Moving Mountains (Part 3)

It’s been said that the difference between danger and disaster is preparation.

“Be prepared” is the motto of the Boy Scouts, and it’s good advice when you’re headed into the mountains. You need to be physically ready for challenge of the peaks—core body strength, cardio-vascular endurance, and mental energy. You need to have adequate clothing and emergency supplies, like a headlamp and compass. And you need to know the mountain and trails you’re going to. Maps, guides, and experienced friends help you understand where you are and what surprises might be around the next bend in the trail.

Investors need to be ready for what the markets might throw at them as well. Research, documentation, and mental preparation are critical to dealing with the surprises that markets inevitably send us. Researching investments can take time, but it’s worth it. If you understand what a business does and how it generates its cash, then the market’s gyrations are less likely to cause you to panic.

Documenting your decisions is also a great defense against second-guessing yourself. Going back to your files to see why you bought or sold what you did when you did will help you learn about both the markets and your own mind. And understanding ourselves is the real key to investment success. Recognizing how much risk you can tolerate and your other limitations is an ongoing process—and the way we prepare mentally for the markets.

With preparation, market volatility becomes opportunity. Without preparation, it can lead to permanent losses to a portfolio.

Douglas R. Tengdin, CFA

Chief Investment Officer

By |2013-05-17T10:48:01+00:00May 17th, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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