Maintaining a level temperament is essential when it comes to making smart investment decisions.
Often markets go through volatile time periods, and it is during these times when an investor’s temperament is strongly tested. In terms of successful investing, having a strong control over an individual’s own temperament will usually top any intelligence they have acquired through the years of experience.
During an interview in June 1999 with Businessweek, American business magnate, investor, speaker and philanthropist Warren Buffett states “Success in investing doesn’t correlate with IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people in trouble investing.”
Since then many other successful investors have continued to back this statement.
When it comes to smart investing, Dimensional Global firms’ data shows that over a five and a half year period (January 2014 till June 2018) the ‘DFSVX’ (US small companies portfolio) only provided a 38% return compared to the S&P 500 Index’s (The largest 500 listed companies in the US) return of 61%. These are time periods which strongly test the temperament of investors.
It is the idea of long term investing benefits that need to be constantly thought of during these times, as even though the ‘DFSVX’ had periods of underperformance compared to the S&P index, their total return from establishment till June 2018 is 1,642% compared to S&P 500’s total return of only 893%. This is true testament that maintaining a level temperament through tough performance periods, can in the end still achieve better investment results.
Are your investment decisions based off rational thought or temperament?
Here at Financial Architects, we can help you ensure the investment decisions you make are made based on smart decisions with a strong discipline in staying focused on the end goal.
Click here to talk to one of the Team about disciplined Investment decisions or click here to book a complimentary appointment so Financial Architects can help you.