I’m not a religious person, but I’ve always loved the serenity prayer:
God, grant me the serenity to accept the things I cannot change,
Courage to change the things I can,
And wisdom to know the difference.
For those who prefer a more secular expression, Mother Goose offers this:
For every ailment under the sun
There is a remedy, or there is none;
If there be one, try to find it;
If there be none, never mind it.
This wisdom applies to so much in life, including — you guessed it — investing. Those that can embrace it will not only suffer far less anxiety, but will also find greater reward.
As investors we can never hope to change things like price volatility, macroeconomic conditions and market sentiment. And yet, ironically, it is here that the financial media focuses most of its attention.
While sometimes noteworthy, these factors hold little practical value to investors. They are, however, the source of most of our anguish.
Fortunately, the things over which we do have control are far more important to our investment success.
The number and types of shares we hold are perhaps most important. A decent spread of quality companies, over which we have built a firm understanding and have a reasonable estimate of value, is paramount.
Our general investment strategy is also crucial; and here it’s a case of keeping it simple. A commitment to consistently save and invest over a long period of time, with a minimum of tinkering, is about as technical as we need to get.
Finally, we need the courage to be honest with ourselves. To know our limitations and to continually work towards expanding our circle of competence.
This is perhaps the greatest challenge, but it is very much within our control.
Arrogance and hubris are the source of so much share market misery, which is why investors would do well to remember Socrates’ words:
I am wiser than this man; it is likely that neither of us knows anything worthwhile, but he thinks he knows something when he does not, whereas when I do not know, neither do I think I know; so I am likely to be wiser than he to this small extent, that I do not think I know what I do not know.
So go forth with serenity, dear investor, with a clear focus on the things that matter and over which we can hope to have some control.
All else is noise and distraction.
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