I am of the opinion that in order to be successful every long term investor requires some type of 'investing philosophy'. Simply put, these are statements that define my behaviour as an investor for the long term. This philosophy is the backbone my strategy as a whole.
It is especially important to have some investing rules to live by when the markets are as volatile as they have been lately. With the loud business media, falling markets, whining analysts, and frightened friends and colleagues all ringing in your ears - these statements will be your enduring battle cry that pushes you forward.
Here is my philosophy which can also be found on the right panel of this blog...
1. I am foremost a buyer of securities and seldom a seller, with a stalwart view to the long term.
2. I will only buy stocks that I would average down on. 'Average Down' - Means I will buy the same stock at a lower value to increase my holding and at the same time lower my adjusted cost based on the holding.
3. I will be patient, and disciplined, and always stick to my system.
4. I never worry or panic, and I always remember my initial reason for purchasing the stock in the first place.
5. Dividends are half the journey; meaning that a large chunk of total returns will come from dividends. It is also important to remember that dividends are always more stable than their underlying share values, and that the growth of dividends over the long term has a powerful affect.
I refer back to these statements sometimes to ensure I am on staying on the right track. Notice how there are no real specifics here, however the generalities really lend themselves to guide a certain mode of actions. Emotions can often crop up in an investor which one did not realize was present. These emotions can often lead to reckless actions or actions that take you away from your philosophy and therefore away from your goals. I find that having an investing philosophy in writing like this helps you combat these emotions, and aids you in being a 'solid Pine tree' among a plantation of withering deciduous shrubs and wavering annual grasses.