Handling highs and lows in investments
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Handling the highs and lows in investments involves managing one's psychology and maintaining a long-term perspective. Experts provide several strategies to navigate these fluctuations:
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Stay Unemotional: Howard Marks, co-founder of Oaktree Capital Management, emphasizes the importance of resisting emotional reactions. Average investors often buy high and sell low due to emotional responses. To succeed as an investor, one must act contrary to this tendency, buying when others panic and selling when others are overly optimistic 1.
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Manage Investor Psychology: Justin Ishbia from Shore Capital suggests balancing risk and calculated decisions. He advises learning the industry deeply, which can help stack the odds in favor and manage psychological impacts during market fluctuations 2.
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Understand Market Cycles: Gene Frantz from CapitalG highlights the inevitability of market cycles. He advises staying creative and finding wise investment opportunities even during frothy or downturn periods, while maintaining a long-term perspective on exits and valuations 3.
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Patience and Resilience: Spencer Sherman talks about accepting the cyclical nature of markets and cultivating resilience. Recognizing that ups and downs are natural can help investors remain less reactive and more patient, which is crucial for long-term success 4.
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Volatility as Opportunity: JL Collins advises continuing to invest during market volatility, turning it to your advantage. He suggests that maintaining a consistent savings rate and buying at lower prices can have significant long-term benefits 5.
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Investing in Your Lane: Sal Di Stefano recommends investing in areas you understand. This familiarity helps ride out market dips and make informed decisions with confidence. Sal's approach allowed him to identify opportunities in home fitness during the COVID-19 pandemic 3.
These insights from experts highlight the importance of emotional control, deep industry knowledge, long-term thinking, and resilience in successfully handling investment highs and lows.
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