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Caution: Not everyone is a Warren Buffett
Tuesday 1 March 2016
Before you set foot on the trading floor, you should know what type of investor you really are. This issue is far more important than you think. Unfortunately, no bank manager can help you with this.
There are investors who invest their money for the long term in stocks. They ignore fluctuations and remain invested for many years and even decades in the stocks they chose. They firmly believe in property and avoid paper money and bonds as an investment.
But this type of investing is not recommended for many investors. Some simply do not have the patience and nerve to hold equity positions for so long. For others it is just too boring and frustrating not to act and at times sell the shares. They prefer to explore other investment opportunities. Still others need the sense of achievement to be able to boast of realised capital gains.
This is not so much about which of the two strategies would be more successful: Real long-term investors versus the practising short-term speculators. Each investor really should find out to which category he belongs. He has to deal with this and be honest in his self-analysis. It does not help to copy and mirror the actions taken by prominent large investors and follow their philosophy.
A good example of this is the "case" of Warren Buffett from Omaha. With his long-term strategy to stay invested in blocks of shares in a company, he has
over time, achieved a fantastic performance. He is revered by many investors and small shareholders. His words are listened to with reverence. Thousands of investors make the pilgrimage to attend the Annual General Meeting in remote Omaha. They all try to become savvy investors by emulating him.
But not everyone has the psychological profile of a Warren Buffett. And even if the devout investor travels 20 times to Omaha, he will never have the
same mind set and nerves as the "Oracle of Omaha". Buffett's Berkshire Hathaway portfolio can not be mirrored directly to their own portfolio.
Of course, it sounds great, if one is regarded as a wise investor who - just like Buffett manages his capital prudently over the long term. Where the turmoil in
the stock markets is of no concern. The person who could also sleep peacefully in 2008. Who was not annoyed and anxious by the suddenly falling prices in the summer August 2015.
But the question is: Do you really really have such a mind set? Especially investors from reputable professions or in high society, find it difficult to emulate this. Which accountant or lawyer wants to admit that he is a nervous gambler?
Which chief executive of a large company or representative of an old family of industrialists will joyfully admit that he is particularly fascinated in speculating in markets?
From my years of experience I am convinced that it does not matter if you are about to buy your first lot of shares or if you "muddle" through with limited success for years. A self-analysis is the extraordinary and deciding factor. There is no bank advisor or trustee to help with this. These people will just hold a mirror in front of you. Whoever wants to happily invest their capital with success in the stock market for the long run needs to know exactly who is “on the bridge” steering the ship. The investors themselves are really at risk. Your investment strategy must match your character and outlook. If you do that, you will feel much more comfortable and at ease. It would not surprise me roif your performance will suddenly impve. It is best to consistently and systematically invest and make your money grow. Otherwise, you will be constantly buffeted and thrown about by stock market gyrations.
My tip: If you simply can not do your own self-assessment then engage someone you still know well from your kindergarten or primary school for a confidential
conversation. Since you were then still the way you really are. You only 'changed' afterwards. Well, the stock market has been good ...for Many.