Trader looks at market graph 311 (R).
(photo credit: REUTERS/Tony Gentile)
If history repeats itself, and the unexpected always happens, how incapable must
Man be of learning from experience.
– George Bernard Shaw
Boy, how time
flies. While it seems like just yesterday that we were preparing for last Rosh
Hashana, here we are again about to enter the period of the High Holy Days. Once
again we are preoccupied with how we plan to improve ourselves in the upcoming
year. Be a better spouse, give more charity and visit the sick are just some of
the goals that we set for ourselves to become better individuals.
focus our self-improvement not just on what we can do better in the upcoming
year, but also by looking back and understanding where we fell short of our
goals. In today’s fast-paced, livefor- the-moment culture, taking time out to
reflect on the past and thoughtfully plan for the future may not be trendy, but
it’s the only way to truly improve.
Rabbi Abraham J. Twerski
brings a great example to illustrate this point: “Is it coincidence that our
generation is infatuated with digital watches and clocks? Old-fashioned
timepieces told time by a pointer, which had the past behind it and the future
in front of it. These timepieces symbolized an awareness of both, but a digital
display focuses exclusively on the present moment and gives no recognition to
the existence of either the past or the future. While we should not allow the
burdens of the past nor the anxieties of the future to exert a destructive
effect on our living, the constructive lessons of the past and a responsible
attitude towards the future can guide us to a proper and responsible
As we tend to spend most of our time preparing ourselves
spiritually for the new year, now is a perfect time to use many of these same
principles to get our finances in order as well ( after all, this is an
investment column and I had to make the connection!). Don’t think that reviewing
the past is for spiritual improvement only. Taking the time to review your
investment mistakes of the last year may help you become an improved
investor.STICK TO A STRATEGY
The culture of instant gratification is
also played out in the arena of investing. Turn on the TV, check your
e-mail inbox, or even go to a synagogue kiddush, and you are likely to hear
about “hot stocks” that will make you rich in a very short time. Who needs to
own a stock that increased by 8 percent in value and pays a nice dividend when
you can own the next Google or Apple?
What inevitably happens is that investors
tend to quickly buy a “hot tip” – only to then sell it as soon as the next “tip”
comes along that they must buy.
In investing, the way to make money over
the long run is by sticking to a strategy. Isn’t it strange that with all the
transparency to be able to see exactly what top investors are buying and
selling, and even read why they are making the moves that they are, that
investors who try and copy them are unsuccessful?
Two university research papers
on the subject both came to the same conclusion: Investors lack the discipline
to exactly follow what the “top investors” are doing. They start interjecting
their own analysis into the equation, don’t buy or sell all the same stocks and
ultimately underperform the market.DEFINE YOUR GOALS
Investors need to
look forward as well. You need to define your goals. Whether you invest to fund
your retirement, to pay for children’s weddings, to leave an inheritance for the
next generation, or a combination of these reasons, understand your goals and
invest with those goals in mind.
Due to the emphasis placed on it by the
financial media, investors often pay too much attention to performance and too
little attention to why they are investing. If you need your money in a year or
two to pay for a wedding, you may have to accept getting a small, guaranteed
return on your investment instead of “trying to beat the stock
Stock-market gyrations and returns are almost irrelevant to an
investment portfolio with a short-term horizon and where principal protection is
the ultimate goal. If you understand your goals and you invest with an eye on
meeting them, your chances of success will be much greater.
May we merit
a happy and healthy new year.
Aaron Katsman is a licensed financial
adviser in Israel and the United States who helps people with US investment