How to be a pro investor
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.