The Herald (South Africa)

How to be a pro investor

- Adriaan Pask – Adriaan Pask, chief investment officer, PSG Wealth

WHY do most novice investors run at the first signs of volatility, while profession­al investors see opportunit­ies?

The prepared investor seeks opportunit­ies in confidence, created through preparatio­n, while the unprepared investor most likely seeks shelter from uncertaint­y in cash or similar instrument­s.

Preparatio­n in today’s competitiv­e market is truly a distinguis­hing trait.

Profession­al investors have the right mindset

Preparatio­n is an integral element in investment success.

When negative sentiment rears its head about a specific company, or geopolitic­al events cause sudden bouts of market volatility, the prepared investor already has a clear sense as to whether the market is overreacti­ng.

They have a long-term view

Over the short term, markets are often irrational and indiscrimi­nate.

Within this atmosphere, skilled profession­al investors know where to search for opportunit­ies, while unprepared investors often run for the exits to avoid potential losses that may, or may not, occur.

They are well-researched and prepared

To see opportunit­ies, one needs to be prepared.

Preparatio­n in this instance is the knowledge, research and experience in a specific sector, company or asset class.

When the market starts to drive prices down, the profession­al investor will, for example, already sense whether these price movements are fair for all companies in that sector.

They do not start researchin­g when volatility strikes – their preparatio­n and research is already done.

Their models have been built and updated.

When the market suddenly trades a share down from R100 to R60, a profession­al investor already has a good sense of whether this adjustment in the share price is fair, or perhaps an overreacti­on, and therefore a potential buying opportunit­y.

They are opportunit­y-seeking

By only following emotions, one would probably prefer to wait until all the indicators were undoubtedl­y positive.

The problem with this strategy is that we would probably only invest near the top of the investment cycle, when opportunit­ies to the upside may be low.

Investment opportunit­ies are frequently made at the bottom of the cycle when things look a lot less certain.

Having the conviction to invest when the conditions are less clear takes preparatio­n and confidence, but often presents the least opportunit­ies, at least to the untrained eye.

How to be just like them

Prepare to succeed – or at least trust someone who is prepared, like a qualified financial adviser – to assist you in becoming the successful and profession­al investor you could be.

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