DOLLARS AND SEN$E

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The Rich get Richer, but so can you!

Chris HanlyBY CHRIS HANLY

INVESTMENT CONSULTANT, GARY GOLDBERG FINANCIAL SERVICES

The old adage “it takes money to make money” is hard to argue with, but discipline and patience are also a key factor when it comes to investment success. I took a look at some research done by Fidelity, S&P Capital IQ and several universities who studied the investment habits of millionaires – in particular self-made millionaires. I can’t say that I was very surprised by the findings, as their methods closely match what I tell my clients on a regular basis. Keep calm, don’t allow short-term events to influence your long-term investment decisions, and most importantly, remain disciplined. To wit: Just look at what happened about a month ago when Great Britain voted to exit the European Union – the so called Brexit. Markets around the world fell on that Friday and Monday, retreating about 5%. Only to end up being slightly higher than their Thursday closing price by the following Friday. 6 measly trading days, over 10% of market moves, all to end up where major indexes started.

“Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves.” – Peter Lynch

Markets, at least in the short term, are driven extensively by fear and greed, which creates continuous opportunities. Successful investors such as Warren Buffett have advised buying when people are fearful and selling when people get greedy, because he knows that the herd instinct of average investors will lead to big opportunities. While that may seem counter intuitive it makes perfect sense, after all we all know that you’re supposed to “Buy Low and Sell High”.

Wealthy investors tend to adhere to some very sound investment principles that anyone can follow. Chiefly, they do not allow their emotions to dictate their actions and investment decisions. Successful investors know that every bull market is followed by a bear market, which is followed again by a bull market. By understanding the history of markets, and believing in their investment approach for the long-term, these self-made millionaires are able to tune out the noise that cause so many to panic. There is another thing many successful investors have in common, they work with an advisor to help them keep their emotions in check. It’s not that they don’t necessarily have the skills or abilities to be a ‘do-it-yourself’ investor, it’s that they understand and believe in the value of advice. A 1%’ish annual fee is a bargain compared to missing out on the next bull-market run because of fear of a correction.

Christopher Hanly is an investment consultant with Gary Goldberg Financial Services in Suffern and can be reached at 845-368-2907 or chris.hanly@garygoldberg.com.

 

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