No Need to be Smarter or Faster
Board: IV Value Central
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Hey Dragon --
As an individual investor, your best shot at an edge over the market is driven by your patience. You don't need to be a 'smarter' or 'faster' analyst or have better access to information. Unless you've got the billions the big trading firms do, any edge you have, other than patience, is going to be minor and short-lived, anyway.
That said, the longer I invest, the less I care about relative returns.
For one thing, my primary strategy is based on trying to grow our dividend income. What I've found is that the strategy works well in boom times when companies naturally raise their payments, but that it also holds up well in not so boom times, when each new purchase or reinvested dividend buys all that much more stock... A lousy year on the net worth front that STILL brings with it a double digit increase in passive income isn't all that bad in my book.
For another thing, what I've found is that our general pattern from a performance perspective is that we're getting decent overall returns, often beating the market when it tanks and often losing a bit of ground when the market booms. There's a very real risk that if I go chasing faster returns by looking to 'beat those booms' that I'll wind up chasing things right off a cliff.
And finally, as I talk to friends and family in this economy, the more I realize that the most important split isn't who's beating the market and who's not, but who is capable of managing their money and who isn't. I know far too many people who make more than I do who are struggling way more than we are. The acts of budgeting, saving, and investing matter a ton more than the returns on any investment, when it comes to personal money management. I'd rather have cash invested earning a market-trailing rate of return than have no cash available to invest in a market-trouncing system...
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