If you are a thrill seeker, investing might not be suitable for you

There are very few subjects in the field of investment that are more controversial than the notion of timing the market (exciting!...?) Some believe that there is no crystal ball and thus it is impossible. Others claim that they can do it perfectly. The truth may perhaps lie somewhere between the two extremes, but today I am picking sides.

These are the top 3 strategies that I swear by to successful investing. (I hope they don’t put you to sleep because they can be BORING)

1. “Timing the market or Time in the market?”. I choose the latter.

Image Source: CNBC

Looking at data going back to 1930, Bank of America found that if an investor sat out the S&P 500′s 10 best days every decade, his total returns would still be significantly lower than the return for investors who stayed invested throughout. To top it off, the market’s best days typically follow the largest drops, meaning panic selling can lead to missed opportunities on the upside.

Enough said, having time in the market is the boring thing to talk about, because it requires you to DO NOTHING in the face of a crisis. People want to react – they want to take action and make decisions on, what stocks to buy, which sector is the next big thing and what they think or feel they should do when stock prices are high or low - Until the graph above proves otherwise.

In summary, by staying invested and riding out the recession, your life is likely to be better off than even if you time the market flawlessly. Moreover, the best 10 days or 10 worst days is just 2.74% of a full year of 365 days. You need the stars to align to be able to pick these 10 days accurately.

Apply the investment philosophy of spending time in the market, and just stay invested. Probably the hardest thing to do when it comes to investing, but worthwhile.

2. Ride the volatility using dollar cost averaging

I always pride myself as a man of many interests. Sometimes I pretend to be normal, but it gets boring so I go back to being myself. EXCEPT for 1 thing - Dollar cost averaging (DCA).

Image Source: Eastspring investment

Market is volatile. At the end of September 2021, more than 80% of SNP500’s constituent stocks had declined by at least 10% from their highs. Market volatility is as much your friend as your enemy. With unexpected changes to interest rates, inflation, current covid situation and political risks, we would expect more volatility and they can come at any time.

Through using DCA, we can reduce the impact of volatility over time. This also helps us avoid making one lump-sum investment that is poorly timed with regards to asset pricing. The difficult thing to do after we set up our systems for systematic deduction to DCA, is to do ABSOLUTELY NOTHING (What? Again?) despite the changes to the market and continue to buy in systematically. If you’re the kind who will get bored of being bored, because being bored is boring, then probably subjecting yourself to sleepless nights staring at the stock kicker hoping it falls within your range might be more suitable for you.

3. Diversify your investment risks away

I picked this up from the series Squid Game (if you know you know). This series portrays 2 childhood friends who went on different paths when they grew up. One became successful and the other a failure based on existing societal yardsticks. But both ended up playing the life-risking game because of poor choices made on investments and gambling.

There are a multitude of opportunities blooming today like the Sakura in Spring. You got to be wise enough to assess what you are getting from it, otherwise you might end up like them!

Image Source: The Conversation

My two cents worth: If it is too good to be true, it is too good to be true. When forming a portfolio, consider a core and opportunistic approach. A large bulk of your portfolio, 80%-90% thereabouts, should still form the bedrock of your investment portfolio, while the remaining can be utilised in a more opportunistic manner. Your goals are precious to you and some goals just cannot be compromised. Having a fundamentally strong and strategically diversified portfolio to take care of these goals will mean the following:

1. You can sleep well at night

2. You may not become super-duper rich, but you will have a life that is not too shabby

3. You have a safety net to rely on even if your 10%-20% opportunistic investments go south

As much as I would like to try out all the exciting investment schemes out there, my desire to stay on track on my goals is stronger, and hence I’m sticking to what works. These 3 strategies above help to reduce my emotional input when making investment decisions and take a more stoic stance towards investing – I accept what is within my control and what is not, and I fully welcome crisis because of the opportunities that comes along with it.

My favourite saying to my mentees in my career, which applies to investing as well - “Follow one course until success (unless it proves otherwise with data)” My only wish is to ensure you do not derail away from your important life goals.

Given how boring it can be to invest your money well, would you still do it? The choice is yours!

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Zachary Khoo is an authorized Financial Consultant representing finexis advisory Pte Ltd. This article contains only his personal views and opinions and is for informational purposes only. The information provided is of a general nature only and does not take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and should not be relied upon as financial advice. You should seek advice from your financial consultant before making any financial decisions.