Diversification is most important. By investing in a variety of options, investors can mitigate the risks associated with the possibility of an individual investment failing and wreaking havoc with their investment strategies. The broad experience and knowledge of the Divergent Wealth Investors positions them to determine well how many funds to put into which investment options and when to do so.
Controlling Investment Costs is Key
Investment costs are a direct drag on performance. Therefore, keeping costs low is vitally important. There are generally two fees you pay when working with an advisor who is not commission-based: an investment vehicle fee and an advisor fee. You must look at those fees in aggregate and determine if these fees are providing real value.
Buy Low—Sell High
This principle is a no-brainer, right? Everyone says that they believe it, but you would be shocked at how many people, including professionals, violate this principle. In our experience, we have found that humans are emotionally wired to do just the opposite—buy high and sell low.
Master Your Emotions
We believe human emotion is in direct contradiction to the buy low—sell high high principle. There is a tendency among many to put their money into the markets when they are flying high and another tendency to want to get out of the markets when the markets are down. These tendencies cause investors to buy high and sell low.
Market Timing is Impossible
In our research, we found that no one has consistently timed or predicted the tops and bottoms of every market cycle. In our experience, even the world’s brightest minds have only correctly predicted the short-term direction of the market fifty percent of the time. This essentially means that you can flip a coin and be just as consistent as they are.
Markets Eventually Recover
A diversified market eventually recovers from down turns. (See marketwatch.com.) This principle teaches us that down markets become unique opportunities where one can take advantage of volatility. Imagine looking forward to volatility instead of fearing it.