It’s been a tough year for investors; there is no doubt about that. Investors have had to grit their teeth through some of the worst volatility since The Great Recession. As of September 30 of this year, nearly every major asset class is down.
Past performance is no guarantee of future results. The historical data are for illustrative purposes only and are not intended to predict or depict future results. Performance during other time periods may differ. Due to market volatility, the market may not perform in a similar manner in the future.
Given this volatility and the negative performance, some investors may think they are “losing” at investing. And maybe those investors are, but maybe they are not. As we all know, to win at anything, you need to have an advantage. In my mind, there are three advantages that could allow you to “win” at investing.
- Information advantage
Do you have access to information that no one else has? An example would be an entrepreneur in Silicon Valley who finds out about the most innovative startup companies and products that haven’t hit the market place yet. But, in today’s society with information traveling at break-neck speeds, it has become increasingly difficult to have this information ‘edge.’ This is especially true when you consider that professional investment managers and institutions have virtually infinite information resources plus access to personnel who provide intelligence to make the most educated decisions on where to invest. Now please bear in mind someone can have an information advantage due to being the first on the scene or having access to more information/people, however, when someone has an information advantage due to hearing non-public information, this is illegal and called insider trading.
- Analytical advantage
Can you use the data and information available to other people BUT make better use of it? This could be analyzing the fundamentals and technicals from different companies or investments to be able to accurately predict themes. Or it’s your superior ability to dissect information by reading charts, crunching numbers, and leveraging algorithms. Your analytical advantage could come organically (you’re naturally good at it), from institutional level software, or from experienced professionals like, PhD’s, Chartered Financial Analysts (CFA’s), or CERTIFIED FINANCIAL PLANNER™ (CFPs.)
- Behavioral advantage
Do you have a particular personality type or temperament that allows you to make better decisions? I believe this is a really under-discussed element when it comes to investing. The behavioral advantage is the ability to divorce emotion from your investment decisions. As we all know, when it comes to our money we can get very emotional, especially when we see huge swings in volatility. When we become emotional, there is a higher risk that our trading decisions become influenced by our fear rather than logic and facts. Now of course this is easier said than done. But as Warren Buffett says, “be fearful when others are greedy and greedy when others are fearful.”
If after reading these three advantages, you realize you do not possess any of them; it is never too late to get a second opinion or speak to a qualified financial professional. Qualified financial professionals should have access to institutional resources and data. Further, their software and experience should aid them in detecting trends and deciphering data which can give them an analytical advantage. Lastly, and most importantly, they are not you; so they have the ability to help you navigate (and hopefully mitigate) periods of volatility and duress by ensuring investment decisions are not rooted in fear.