How can we be ready for what comes next?
“Be prepared” is the Boy Scout motto, and it’s good advice if we’re headed into the mountains. We need to be physically ready for challenge of the peaks – core body strength, cardio-vascular endurance, and mental focus. We need to have adequate clothing and emergency supplies, like a headlamp and compass. And we need to know the terrain and trails we’re headed into. Maps, guides, and experienced friends help us understand where we are and what surprises might be around the next bend.
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 inevitable surprises that markets send us. Researching investments takes time, but it’s worth it. If we understand what a business does and how it generates its cash, then the markets’ gyrations are less likely to cause us to panic.
Documenting our decisions is also a great defense against second-guessing ourselves. Going back to our files to see why we did what we did when you did it will helps us learn about both the markets and ourselves. And understanding ourselves is the real key to investment success, or success in any field, for that matter. Recognizing how much risk we can take and other limitations is an ongoing process – and the way we prepare mentally for the markets.
Source: Pxhere. CC0
With preparation, market volatility can become opportunity. Without preparation, it can lead to permanent losses. The difference often comes down to us.
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”