The tactics employed to succeed in investments and sports have many clear parallels. Individuals who see the need of carefully formulating strategies are more likely to succeed in both domains.
To be successful at both, you need a solid game plan. Neither a single strategy works for everyone. To devise the optimal strategy in sports, you must be aware of your strengths and shortcomings as an individual or as a team.
Your investments are no different. You need to be able to focus and avoid being sidetracked by gimmicks, as well as know how much risk you can accept and how long you can stick to the strategy.
Having straightforward, reliable, enduring, and perceptive tactics is essential if you want to give yourself a reasonable chance of succeeding in the stock market. To ensure that you stay on course and reach your goals, consider the following five tactics to help you stick to your investing plans:
1. Consider your tactics as a procedure.
If you are unable to articulate your plans as a process, you are more likely to wing it. You have to be really good at your strategies if you want that to not happen.
It is advised that you document your investment strategy in the form of a flow chart, outlining your course of action or response in various market circumstances or investing scenarios.
Putting it in writing will assist you in expressing and visualizing it, as well as provide guidance during challenging market conditions on what actions to do to avoid making rash investing decisions.
You must periodically review it to ensure that it is consistent with your long-term financial goals. Even if your plans are outlined, they are not final; therefore, constantly adapt to the circumstances. You must adjust them if you find problems following a particular market experience or if your financial goals alter.
2. Is it better to sell or hold?
You should be able to objectively determine whether to sell or hold a stock with the aid of your process. You must establish two sets of objectives for every sort of investment so that you can keep a close eye on the performance of your assets and take prompt action.
a desired return, for as, “I want to buy blue chip stocks and make 10% a year.”
An appropriate risk margin, or a range of losses you are prepared to take (this is your stop-loss goal; for example, if you purchased a stock for RM8.00, you are prepared to hold onto it until it falls to RM6.50 before deciding to sell.)
These goals will prevent the issue of inaction, which is something that many investors often find themselves a victim of.
You need to be very clear about your goals before making any investments. Making informed decisions during a heated debate over whether to wait or leave will be challenging if you don’t have a well-thought-out plan in place.
3. Evaluate the success of your investing plans.
How can you determine whether your investment strategy is successful? Is there a way for you to gauge how successful your plan is? You won’t be able to completely comprehend how well it functions and make necessary adjustments until you can measure it.
Both absolute and relative benchmarks can be used to assess how well your strategies are working. Your financial objective and your investment strategy should align with the benchmark you select.
An absolute benchmark is a planned investment return, like 7% annually, but a relative benchmark is a passive market index, like the FBMKLCI. Although it might be laborious and time-consuming, it is crucial that you assess the level of risk you are accepting in relation to the standard that you have established. Keep track of the return volatility in your own portfolio and contrast it with the return volatility of your benchmark.
Having these benchmarks can help you stay away from investing based on hearsay and feelings.
4. Create a safeguard for your financial investments.
Exchange traded funds, real estate, and stock market investments would all be included in a common portfolio. Bonds, on the other hand, can be utilized as a safety net against the unstable market conditions if you are afraid of taking on too many risks.
A bond is a better hedge against investment losses linked to the stock market the greater its grade.
Compared to corporate bonds, government bonds tend to give lower yields since they are more cautious. You can also choose to invest in exchange-traded funds and unit trust funds for the aim of investing safety.
5. Determine the amount you want to invest.
Determining your investment amount, or position sizing, will assist you in creating a workable plan to reach your financial goals. Knowing how much stock to purchase in a single trade or how much to spend in a bulk purchase that will be stored away is known as position size.
Sadly, most investors overlook this, which has the power to make or break their success on investments.
To ascertain how much and how you must invest, you must first establish your financial goals and ascertain how much you need. Then, you must work backwards from there.
For instance, if your final retirement fund is RM1 million and you have 30 years to invest, your portfolio must constantly generate 7.5% annually, presuming your starting investment was RM20,000. You will need to contribute RM600 per month. You need to know which investment product to put the most money into in order to attain the average returns of 7.5%.
Every individual has different financial objectives when it comes to investing, which calls for different approaches. As a result, it is most definitely not a good idea to follow or duplicate the investment techniques of your friends, relatives, or even financial experts. Though you can take inspiration from them, you will still need to devise a plan that works for you and your objectives.
While long-term objectives, like retirement, will give you more time to adjust to market fluctuations and allow you to be more aggressive, saving for a house requires short-term gains, which means you need to be a little more cautious.
Any strategy’s three primary determinants are asset allocation, duration, and risk appetite. The way you align these shifting factors with the performance of the market will determine whether or not your investment is successful.