This may seem an obvious question with an obvious answer. In some ways it is.
We believe investing to be the means of building wealth to fund lifestyle and personal choices. It is a slow, emotional, and sometimes painful process requiring a robust plan, patiently executed over many years.
Anyone hoping to get rich quick is a gambler and is playing the wrong game. Similarly, anyone unwilling to take on some risk with their money is a saver.
What does good investing look like?
We think ‘good investing’ is about being able to sleep well knowing your portfolio should deliver the growth you need. We believe the best route to delivering this is by following the academic theory and empirical evidence available to us.
This tells us focusing on spreading your investments (diversification) to capture broad market returns makes sense. Being patient, minimising costs and sticking with the plan. These all really improve the odds of a successful outcome.
The one thing no one can control, though, is what the markets do, particularly in the shorter term. Time, patience, and discipline are your allies in the three-steps-forward-and-one-step-back world investing inhabits.
What does bad investing look like?
Low-odds-of-success activities include jumping in and out of equity markets, trying to pick the next Amazon, and chasing certain specific investment ideas. These ultimately lead to disappointment and a narrowing of future lifestyle and personal choices.
Thinking that three to five years is long term, or that it is easy to second guess the markets, are all likely to result in disappointment.
Of course, you may get lucky, but you should not base your financial hopes on this.