When you wake up in the morning, you never really know what the day will bring you. You might have a schedule. Some appointments. Places to go. People to meet. Things to do. But there is no guarantee that all these things will indeed happen.
A person you wanted to meet might cancel the appointment. The place you wanted to go might become not accessible for some reason. And the things you wanted to do might become less of a priority as the day evolves.
The same goes for any business, and of course, for stock investments.
We never know what will happen in the stock market. While promising news about some stocks you bought might have prevailed in the market during the last week and made you feel very confident of future gains and profits on your investment, a single unexpected event can turn everything around.
Hope can turn to fear. Smiles to tears. And instead of counting your imaginary wealth, you might scramble to think about how to manage the next rent payment.
Benefits of having a plan
This is where strategy and planning comes into play. Of course we cannot predict the future. Nobody can. But we can put systems and strategies in place to help us mitigate potential challenges and at the same time offer us the chance to take advantage of potential opportunities.
Those strategies to name a few include:
- Having an emergency fund of 3 months or more of your regular income/expenses
- Having an investment thesis, an investment plan
- Diversifying investments across countries, industries, and currencies
- Having a good mix of dividend-paying stocks and growth stocks
- Being calm
- Being patient
- Having some investment cash ready on the side
- Not being scared to sell a stock at a loss when the story behind it doesn’t match your investment thesis anymore
- Not being scared to buy more shares of a company that is losing value, but that perfectly fits your investment thesis
Taking the time to plan ahead, and to continue working on this plan as we learn, as markets and industries develop, and as challenges arise while opportunities pop-up on unexpected fronts makes all the difference between successful investors and gamblers.