Podcast Summary
Mindset of a Farmer: Staying calm and patient, trusting the process, and focusing on long-term goals can help reduce stress and increase confidence in investing, just like a farmer does with crops.
Having the right mindset is crucial for long-term investing success. This idea was inspired by a social media post titled "Think Like a Farmer," which offers seven tips for being a successful farmer that can also apply to investing. One of these tips is to not shout at the crops when things don't go as planned. This means not reacting emotionally to market fluctuations or individual stock performance. Instead, remain patient and trust the process. This can help reduce stress and increase confidence in your investment strategy. Additionally, remember that setbacks are a natural part of the investing journey, and focusing on the long-term goals can help weather any short-term volatility. So, stay calm, stay focused, and think like a farmer.
Investment emotions: Focusing on long-term vision and fundamentals is key to avoiding frustration and making informed investment decisions, rather than getting upset over short-term losses or comparing performance to others.
Getting upset or angry at investments, specifically stocks like Tesla, for not meeting our expectations or experiencing short-term losses is a waste of energy. Instead, it's essential to focus on the long-term vision and fundamentals of the company. Comparing the performance of one's investments to others or expecting them to grow too quickly can lead to frustration and impatience. It's crucial to remember that the fault usually lies with our expectations and choices, not the investments themselves. As farmers cannot make their crops grow faster by shouting at them, we cannot force stocks to perform as desired. By staying patient, focusing on the business, and aligning our investments with our goals and risk tolerance, we can avoid unnecessary frustration and make more informed decisions.
Risk vs. Reward: Understanding the trade-off between risk and reward is crucial for investors. A diversified portfolio like the Vanguard All World ETF may be less risky but offer lower returns, while a focused fund like the Invesco EQQQ Nasdaq 100 ETF may be riskier but potentially rewarding.
Investors should understand that different investment strategies come with varying levels of risk and reward. The Vanguard All World ETF, with its diversified portfolio across multiple countries, sectors, and thousands of companies, is likely to be less risky but also offer lower potential returns than a focused fund like the Invesco EQQQ Nasdaq 100 ETF. In the example given, the All World ETF grew slower than the Nasdaq 100 ETF, but this was an intended choice based on risk tolerance. Frustration may set in when individual companies or indexes underperform expectations, but it's essential to consider whether the issue lies with the investment or external factors before making hasty decisions. Long-term investing requires patience and a commitment to giving investments the time they need to grow.
Investing Patience: Choosing the right investments based on personal goals, income, and risk appetite, and practicing patience, can lead to significant long-term gains in investing.
Investing, like farming, requires patience and choosing the right investments for your specific situation. The speaker regretfully shared an experience of selling NVIDIA shares prematurely before they had the chance to grow significantly, missing out on potential gains. Similarly, every farm and investor is unique, requiring different approaches and investments to thrive. It's essential to learn about investing and understand what works best for your personal goals, income, and risk appetite, rather than blindly following others. The speaker emphasized the importance of patience and choosing the right investments for your individual circumstances to maximize long-term gains.
Portfolio Care: Regularly top up portfolio with new investments, monitor sub-par investments, and stay informed to help portfolio grow and thrive over long term using tools like Trading 212
Just as a farmer carefully chooses the right plants for their soil, irrigates and fertilizes them, and removes weeds to ensure optimal growth, an investor should also regularly top up their portfolio with new investments, keep their sub-par investments in check, and stay informed about their holdings to help their portfolio grow and thrive over the long term. Trading 212, with its low fees and wide range of investment options, can be a helpful tool for irrigating and fertilizing your portfolio. Remember, the key to successful farming and investing is consistent care and attention.
Investment risk management: Identify underperforming stocks and water successful investments, stay informed, remain patient, and maintain a diversified portfolio to increase chances of long-term success.
Investing involves managing risk and making adjustments to optimize returns. Just as a farmer must tend to their land by removing "weeds" (underperforming stocks) and watering "flowers" (successful investments), so too must an investor. This process can be challenging, as it requires identifying which investments are underperforming and which are thriving. Additionally, it's important to remember that markets experience both good and bad seasons, and some external factors, such as economic conditions or natural disasters, can be beyond our control. Therefore, it's crucial to stay informed, remain patient, and maintain a diversified portfolio. By doing so, investors can increase their chances of long-term success.
Investor reactions: Stay calm and focus on what you can control in your investments, such as choosing the best investments, topping up portfolios, and removing poor companies, to ensure long-term growth.
While we cannot control external factors affecting our investments, such as economic events or market fluctuations, we can control our reactions and actions towards them. The speaker shared his past experience of buying more stocks when their prices dropped, which often led to poor decisions. Instead, it's crucial to stay calm, sell if necessary, and focus on what we can control, such as choosing the best investments, topping up portfolios, and removing poor companies. By doing so, our investments can grow over the long term, despite unpredictable market conditions. Remember, investing is a marathon, not a sprint. So, take a step back, focus on what you can control, and let your investments grow.