Which lane are you driving in?

Some of us have experienced driving behind a stubborn slow driver blocking the traffic in the fast lane. Impatient drivers usually tailgate them to force these ‘slowpokes’ off the lane.

This can be dangerous because the slow drivers may not be experienced enough to change lane quickly and confidently. The fast lane is no place for the timid nor the ‘stubborn attitude’ driver.

If you are not an experienced driver or need to drive slower due to tiredness, it’s really best to avoid driving in the fast lane.

Similarly in investing, avoid being in the fast lane and getting involved in speculative trades if you are not an experienced investor.

You may just panic and lose your cool when the markets suddenly turn downwards.

On the other hand, if you prefer to drive in the leftmost lane and stay in conservative assets, you may also be overly cautious about investing and only reach your destination in a much longer time.

A better choice is to drive in the middle lane as you don’t need to be too slow or too fast.

Investing in the middle lane means that you are investing a good portion of your income in a diversified portfolio of local and international stocks, bonds and income generating assets, customised to your financial needs and risk capacity.

By being in the middle lane, you keep a constant driving speed, and avoid the danger of changing lanes too often – much likened to trading and switching out of your funds frequently according to market sentiments. Despite what you hear, trading and frequent switching aren’t profitable over time.

For example, when your funds are switched out, when are you going to switch the funds back in? Trading on the other hand tempts us to pour everything back and more into our trades although the euphoria of earning quick profits can be exciting.

If you really want to trade, allocate a small portion of your funds for ‘play money’.

If you are switching out your unit trust funds, do it only because it is part of your annual rebalancing exercise or there is a global catastrophic event which can rock global economic fundamentals.

Otherwise, it’s just best to keep a cool head and enjoy the ride in the middle lane until you reach your destination.

The writer can be contacted at info@successconcepts.biz.