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Stock market indices around the world fell recently, some dramatically. Financial pundits debate whether this is a bubble in the process of bursting or simply a correction of previously overvalued shares. I’ll tell you right now: it doesn’t matter. If you want to invest in stocks, I want you to play a different game—especially if you’re new to investing. If you’re like me, and you enjoy feeling that your life is in order and that you have the energy, time, and money to make good decisions, start researching your investment strategy now.

1. Look long term

I was lucky early in my career to manage money for a billionaire. Because he had no one to report to but himself, and he had solid long-term goals, he didn’t care much if his stock portfolio dropped five percent in one day. As long as the investments I made for him met his long-term financial goals, he was satisfied. Of course, I freaked out when stocks dropped multiple percentage points in a day, but his calmness helped me see investment for what it truly is: delivering long-term performance.

If you’re here to make a quick buck, you’re in the wrong place. The Heels & Yield approach is about long-term investing, not day trading.

A daily or weekly loss in the market can be a trigger to reexamine your investment strategy. What’s your investment goal? What’s your time horizon? If your investment case is solid and your time horizon appropriate to your goal, then sit tight and wait to evaluate performance over a longer time period.

I had to develop a healthy perspective on successful and sustainable investing. I don’t make money every single day as a long-term professional investor. I aspire to make money for my clients over a three- to five-year investment horizon.

2. Keep your expectations reasonable

As a self-made investment professional, my story starts with delivering consistent absolute returns to my clients (and getting paid for doing so).

I never tell my investors to expect their portfolios to double within a year. However, in nine years of investing professionally I have consistently delivered market-beating absolute returns of 10 to 15 percent annually.

Being a portfolio manager also taught me this longer term perspective. The expectation is that good fund managers have two or three winning years out of every four. Another metric is that good investment professionals make sound decisions about 60-80 percent of the time, which means that 20-40 percent of the time they make mistakes.

Although I tracked and reflected on the performance of my investments frequently—sometimes daily or weekly—I would always take this longer view in assessing my success.

That said, at times 70 to 80 percent of my investment decisions paid off. And there were periods when I did well in four out of four years. When that happens, I always ask myself: are the gains the result of a stock market bubble? Is it time to get out of a position or to rebalance my portfolio?

3. Learn to invest during a bubble

Looking back, I realize that the biggest ingredient in my investment success was learning to invest in stocks during a market bubble.

Why? Because that experience taught me to do huge amounts of research before committing my money and taught me how to size my positions so I can make money throughout the year.

For anyone new to investing who has been sitting on the sidelines worrying about investing during a bubble, the good news is that now is the time to jump in—as long as you do it wisely.
You don’t learn timing and sizing overnight. I’ve learned it through many years of losses (mistakes) and wins. Because I learned how to invest during a market bubble, I’m always cautious of rising valuations. I make sure to reduce my positions when I think the market is at risk of a collapse or the stock positions are grossly overvalued (deserving of a correction).

After all, I invested during the tech bubble of 1999-2001, the global financial crisis of 2008-2010, and the China A-share collapse in summer of 2015. Because I believe we’re in an equity market bubble right now, I’ve resized the positions for my clients.

If you wait to invest until exactly the right time and place, and insist on knowing everything there is to know about decision-making, you might never invest.

Or you might not be ready until a few years before you’re ready to retire, which is far too late. It’s kind of like being ready to have kids. Nobody ever feels totally prepared, but at a certain point, if you want to be a parent, you have to jump in with the knowledge and skills you have.   

If you start investing during a bull market, you might make money so quickly that you won’t need to hone your investment skills. Some people may have the discipline to take their investment gains with them and exit the market.

Unfortunately, most human beings are greedy by nature. When stocks keep going up, they don’t know when to sell. Instead of selling after achieving a reasonable return and buying more when prices go down, people often hold on until the stock collapses and sell at a huge loss. 

Read more: What to do when life doesn’t match with your financial plan

4. Understand investment timing vs. investment sizing

Many people think that timing your investment to take advantage of market lows and highs is the most important factor in investing success.

I would say that sizing an investment is more important (along with portfolio allocation). If the timing is wrong—that is, a stock is under- or over-valued—you can start by buying a small amount initially to shield yourself from potential risk. Then you can gradually increase your position as the stock’s price dictates.

While losing half of a $1,000 investment hurts, it’s not a disaster because the investment was sized right. You don’t lose half of your entire portfolio.

Investing in a crisis is another skill set. During the global financial recession in 2009, a lot of the portfolio positions I held for my billionaire client collapsed. But because the underlying investments were solid, we were confident that the portfolio would rebound. I also was nervous because I had lost money in our smaller portfolios. In the case of the smaller portfolios, which also lost money, market sizing was a saving grace. I had sized those investments to be small because we felt like the stocks were overvalued.

In fact, the billionaire advised me to stop staring at my Bloomberg screen and lamenting about the losses and head out to play tennis on the days when I felt especially bad about losing money even in our properly sized positions. It’s all part of keeping the long-term perspective.

invest in stocks
5. Research, research, research

Another way to protect yourself is to do exhaustive research before investing.

Most of the male bosses I’ve worked for over the years thought when they first started working with me that I took too long to make decisions. Six months later they would see the incredible returns delivered by my meticulous investment research process. My penchant for research also makes me trustworthy. I have evidence to back up my decisions.

In fact, years later, some of those same bosses adopted my investment strategy, and even apologized for not seeing what I saw initially. While my snail-paced strategy might seem unconventional, especially in an environment that values quick profits, it’s been proven over my 17 years of investing experience.

6. Create an investment strategy that aligns with your values
Now is the time

If you’re a non-professional investor, you don’t have to make decisions on a daily basis about whether to hold, buy, or sell a stock. You are investing to meet your financial goals, not someone else’s. You aren’t paid to deliver performance consistently and at all time periods.

When a volatile stock drops 10 percent in one day, you don’t need to decide how to rebalance the portfolio at that moment. You don’t need to know before 5 p.m. how a political event might affect a stock’s share price. You don’t need to reposition your portfolio ahead of the U.S. presidential election or what to do when Donald Trump wins unexpectedly, your stock portfolio grows too rapidly, and you need to rebalance again.

More importantly for non-professional investors, you don’t have to buy individual stocks if you find it too stressful. There are plenty of other ways to invest.

But if you want to invest in stocks, there’s no better time than now to start researching your 10-year portfolio, as long as you keep these five principles in mind.

About Heels & Yield

Heels & Yield empowers women to manage their finances and to nourish their health and their wealth through its proprietary holistic wealth management practices. To help clients achieve holistic wealth with guidance and accountability, Heels & Yield offers services including group workshops and private wealth mentoring that combines financial education with personal financial coaching.



This blog and its contents were created by Heels & Yield Limited. Our blog and its contents are for general guidance and informational purposes only and should not be treated as legal, accounting, financial, investment or tax advice. For specific questions related to your financial, legal or tax situation, please consult your own attorney, accountant, and/or independent financial advisor for expert advice and carefully consider all relevant risk factors. Heels & Yield Limited is a financial education company and not a financial advisory firm or a law firm or a certified public accounting firm. Please visit our website for full terms of our disclaimer and terms conditions of use. Please read our full disclaimer here.

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