10 Questions to Help Define Your Investment Philosophy

Posted by

AAII

There are many different ways to make money in the markets. There’s no one-size-fits-all for every investor. But the ways people lose money are fairly common — chasing past performance, groupthink, overconfidence, loss aversion, fear (of missing out and of being in), looking to get rich in a hurry, taking the markets personally and not admitting your limitations.

One of the outcomes from these mistakes is that investors tend to jump around from strategy to strategy and fad investment to fad investment. I think this is because not enough people take the time to first lay out their big picture investment philosophy, which should be used to guide all future decisions. Investors would rather be told where to invest at all times, preferring tactics over process. Most people learn the hard way that tactics are a short-term fix, but not a long-term solution.

I think the first step in any investment strategy should be to first define your overarching philosophy. Here are ten questions investors can use to help define their philosophy:Philosophy

This set of questions comes from a long-form piece I wrote for the latest edition of the AAII Journal.

Keep reading here for more:
Defining Your Investment Philosophy (AAII)

 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Gregory commented on Nov 05

    In defence of investors who jump around from strategy to strategy.
    Is it possible that something worked in the past but won’t in
    the future? In bear markets: is it possible that prices will fall much
    more than today? We have data about stocks from 1802 (more than 200 years). Is it possible that there will be stock markets in 500 years? If there will be stock markets in 2515 (2015+500 years) than all we know about the past 200 years is just 200/700 of the whole period (until 2515). If You read only 200/700 part of a book can You make any serious conclusion of it? Every important thing we know is just past.
    I don’t know better than You. I’m just an investor who try not to jump around from strategy to strategy:).

    • mugabe commented on Nov 05

      what we know is that jumping from strategy to strategy rarely pays and is usually the result of chasing returns (recency bias) and not a thought-out plan.

      • Gregory commented on Nov 06

        I just highlihgt the basis of uncertainty. Of course I agree with Ben and You and others. “If one does not know to which port one is sailing, no wind is favorable.” Seneca

        “

More from my site