The stock market’s volatile nature can make it challenging for beginners to traverse the many unknowns. In this article, experienced investor Daniel Calugar discusses some important realities new investors must understand and how to navigate the obstacles that exist in the market.
There is No Room for Emotion
To be successful in investing, people must learn to separate their emotions from facts. As the famous Warren Buffet stated, “Success in investing doesn’t correlate with IQ. What you need is the temperament to control the urges that get other people into trouble in investing.” One of the most common detriments to portfolio returns is the excessive trading activity caused by emotions. To be an investor, it is crucial to maintain a level head throughout the ebbs and flows of market cycles.
Invest in Companies, Not Symbols
Many investors, experienced and beginner, can get caught up in following the news for the next hot stock tip or ticker symbol that is trending. While some are just looking to make a quick buck off stock, the key to long term success is to remember that investing in a stock is an investment in a company. Successful investors know to look at stock picks from the lens of a business owner, as owning a share is owning a slice of that company. Don’t just look at short term trends; understand the company’s operations, competitive analysis, place in the industry, and how it stacks up against other investments in your overall portfolio.
Plan Ahead and Create a Strategy
In turbulent times, people can be quick to sell off stocks in a panic. This can ultimately result in a common investing faux pas of buying high and selling low. Before selecting any potential stock to add to your investment portfolio, note why you are choosing that stock. Make a note of specific criteria that would draw you to sell the stock as well. Dive deeper than simple price variations; what are particular factors about the underlying company that would bring you to cut ties? Did their quarterly earnings dip below expectations? Does a new competitor in the industry cause them to suffer a considerable blow to market share? Set definitive expectations and a timeline to help reduce some of the stress and uncertainty when prices dip.
Time in the Market, Not Timing the Market
You will hear it time and time again from investment strategists throughout the industry. To be successful long-term, the amount of time in the market will outweigh trying to time the market with investment strategies. This means the best investors look at their purchase decisions over years and even decades; growth can be found through price appreciation and dividends.
Don’t Check in Constantly
Plan to review your investment selections every quarter or every six months. Continually reviewing your portfolio daily can lead to an overreaction based upon short-term events. Short-term fluctuations are often just that – a temporary up or down that may not reflect your investment goals’ long-term trajectory.
About Daniel Calugar
Daniel Calugar is a data-driven investor with an academic and professional background in computer science, business, and law. He developed a passion for investing as a result of frequent interactions with investment professionals who serviced the investment needs of his legal clients. As a tax partner at the Atlanta law firm of Hansell & Post and the global law firm of Jones Day, he incorporated his partnership interest allowing him to set up and serve as trustee for his own tax-qualified profit-sharing plan. Calugar utilized his technical skillset to design computer programs that would assist him in making more effective investment decisions. He then moved on to hedge fund investments before eventually focusing on more mortgage-backed securities, futures, and options after the stock market crash in 2008.
Dan Calugar has had the privilege to travel the world with his life companion in part due to the flexible nature of his work. He is into fitness and enjoys working out. He is a pilot with over 2000 hours of single-pilot experience flying business jets. He has been active with Angel Flight and has flown over 200 missions for Angel Flight West and Angel Flight Southeast over the past 15 years.
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