With November halfway through and Christmas barrelling towards us like a festive train, it’s probably a good time to start thing about what next year will bring for us investors. 2019 has been rife with talk of the ‘next recession’, but as the markets hit new all-time highs this month, it seems these worries were much ado about nothing.
Still, we never do know what’s around the corner, so here are 3 investing principles to live by as we finish up 2019.
Principle #1 – Keep your eyes on the horizon
Investing should be about looking forward, not sideways. Buying a share of a company means you (hopefully) expect said company to be around and thriving in 10 years’ time.
So don’t worry about what the markets are doing day to day. Warren Buffett always says you shouldn’t own a company for 10 minutes if you don’t expect to hold it for 10 years. So if your company is on track and bringing home the bacon, tune out the noise and let things be.
Principle #2 – Don’t follow the crowd
As we approach another year of this record bull run we’ve been in since the GFC, more and more investors are trying to find the ‘next Afterpay’ or big winner. If markets go up long enough, investors can start to get a little silly and lose track of reality – throwing money at longer and longer odds.
Don’t get caught up in the mania of a hot new stock – always make cool, calm and collected decisions about where your money is going, and you’ll be fine in the long-run.
Principle #3 – Keep cash on the side
“When it rains gold, you want to stand in it with a washtub, not a thimble” – another great Warren Buffett quote that I think is very pertinent in today’s market. What goes up must eventually come down, and 10 years into a bull run is a great time to start building your cash washtub, in my view.
I’m not saying going 100% cash is a good idea, but building up a cash position of 10–30% of your portfolio is a prudent way to manage risk and ensure you can capitalise on any future market corrections when they do eventuate.
Personally, I think these 3 principles are worthy of keeping in mind as we finish up the year in just 6 weeks. No one knows what the future might hold, so keeping eyes on all possibilities is all we can do in preparation.
The post 3 ASX investing principles to live by in 2020 appeared first on Motley Fool Australia.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019