The Investment Journey
Investing is a lot like going on a trip, beforehand you feel the excitement checking in online everyday reminding yourself where you are going. You put loads of money into it, confident that it will all be worth it in the end. But just like going on a trip there is important preparation that needs to take place before you leave and it is crucial you make use of certain tools which will aid you in your journey.
The forms of transport you decide to take are like the investment vehicles you make use of when investing. You probably wouldn’t decide to drive your car if it is a journey over thousands of kilometres across many countries. Just like if you are choosing to make long-term investments for your retirement you would use a very different vehicle than you would to invest your emergency savings.
There are many routes you could take to get to your destination, some routes are much quicker than others but could be filled with more challenges along the way. This speaks to your attitude towards risk while investing and what kind of asset classes you will be investing your money in to throughout this journey. It is so vital to fully understand your investment time horizon before making a decision on how to invest.
The all important destination of your trip is your purpose for investing. We may have many different reasons for investing and each of these investments need to have their own purpose and strategy otherwise how will we know when we have arrived? It is absolutely crucial that you understand what you want your money for in order to appropriately determine where and how to invest it.
All of these factors are part of your crucial investment strategy. Developing an investment strategy is one of the most important parts of long-term investing. A strategy guides our decision making process throughout our investment journey and provides us with direction in times of greed or doubt. It guides us with the most educated way for us to achieve the goals which we have set out for ourselves.
When we are tempted with market noise telling us that bitcoin is the next must buy, that MTN is the best stock to own right now or that every cheap ETF deserves to be in my portfolio, we need that grounding guidance that our strategy is there to provide us with. It keeps our head out of the clouds of speculation and market timing.
This strategy is something that should be developed and refined over many years as you learn new important lessons on your investment journey. It is never possible to have the perfect strategy from day 1, and as you make mistakes and watch market events play out over many years you gain more and more understanding and experience. The more time you spend investing the less your strategies will change as your experience becomes more and more valuable.