3 Investing Home Truths

The markets are always volatile – jumping about from one day to the next as they swing on sentiment. Here are the basic home truths any long term investor needs to always bear in mind, and which keep all the short term noise and volatility in perspective.

Your investing timeframe matters – not anybody else's

When markets swing in the short term it is because other people with different timeframes need to act. If your time frame is different, then you don't need to act at all – other than perhaps looking to take advantage of their despondency or short term desperation to sell assets at a discount.

The greatest gains come from the riskiest assets

Investing in sharemarkets involves risk. The downside can be abrupt and look drastic...but the upside is just as drastic and often quick. Historically it is one of the best performing asset classes for those who ride the wave. Similarly, property investing with leverage – borrowing to buy an investment property – introduces sometimes dramatic gains and losses. These riskiest assets are the ones which will generally produce outstanding returns for the patient investor over a reasonable time frame though.

Remember to think big picture

What happens in the short term in any particular investment often doesn't matter enormously if you have a well constructed portfolio. It is the well constructed portfolio which matters more than what happens with any individual investment within the portfolio. Stay focussed on the big picture: getting the long term balance right of how much should be in what types of investments, and then trying t manage the proportions to stay about right.