Important Investing Lessons

At the very first parent-teacher meeting, my mother was informed that I was quite a little talker in class. My teacher said I was a happy and mostly well behaved 5-year old, but I needed some work on knowing when to keep my mouth shut.

But when my mom came home to share the review, she didn’t come crashing down on me and demand I transform into an anti-social hermit. Instead, she simply told me, “if you’re always talking, you’ll never be able to hear what anyone else is saying. Particularly your teacher.”

It was a simple but powerful lesson about the value of listening. My mom knew that learning to listen and absorb information from other people around me was the key to my success at school.

Just like a good finger painting doesn’t come together in five seconds (or in the case of investing, five months), success as an investor is a long-term project that requires commitment and dedication. Nothing worth any value comes quickly, so taking the long-term view with investing is the best way to avoid short-term frustrations.

The market is built on chaos. But when it comes to your portfolio, structure, process and order are the keys to success. Straying too far from the S&P 500 and taking on too much risk can lead to sharp performance divergences. Building a strong core of low-cost index funds in the S&P 500, Nasdaq 100, mid caps and small caps provides a solid foundation for investors looking to track equity-market returns and reduce expenses.

A good friend of mine started an investment club a few years ago. The group meets once a month on Thursday night to eat dinner, hash out their best investment ideas and share thoughts on the market. No one at these meetings is trying to be Joe Hedge Fund, but by sharing their passion and interest in investing with each other, each member has created a platform to grow their investment knowledge and improve their results.

Successful investing requires the right partners. At the top of that list is a good investment advisor, an incredibly powerful resource with the insight to help clients dodge unnecessary fees and develop customized portfolio strategies. Picking the right brokerage firm is also key, where investors have a large universe of specialties to choose from that include full-service, discount, online and more. Picking good partners will have a big influence on the success of an investment strategy just like avoiding troublemakers will keep you out of the principal’s office.

Even the best and most successful investors have setbacks. The only difference between the winners and losers is how they respond to that adversity. Making a bad investment or having a tough year doesn’t mean it’s time to quit or give up. But investors who focused on the big picture, stayed optimistic about the long-term picture and kept making monthly contributions were able to buy lows and eventually saw big gains by capitalizing on short-term volatility.

Sally Krawcheck is nicknamed the Queen of Wall Street. The former president of Bank of America’s Global Wealth and Investment Management Division testifies to the power of hard work. But in a recent interview with LinkedIn, Krawcheck also noted how important it was to take breaks, saying that her best work frequently comes after 30 minutes of playing with her daughter and putting her to bed.

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