Starting a lifelong investment journey can be both exciting and fill one with trepidation. We recently interviewed a new AXIAM client about her feelings after 90 days of investing. Here are the new investor insights she shared with us.
Investor Insight 1: Start now
She waited to start investing because she tried to time her entry into the market while simultaneously getting the best currency exchange rates. She found that timing the market in the short term is not possible, and short-term exchange rates are unknowable. Maximising on the strong Rand at the beginning of 2018 did not necessarily mean she was able to buy more shares as the US market was reaching all-time highs.
The best time to start your lifelong investment journey is now. The longer you wait, the less time you have to grow wealth.
Investor Insight 2: Don’t see red when prices decline
The excitement of seeing the Saxo Online Trading Dashboard populated with the list of shares bought can quickly dwindle if you focus on the daily share prices. As an entrepreneur’s daughter, she was taught to always look at price as a measure of value.
But she has learned that the share price does not always reflect the company’s performance. She knows as long as the companies she owns continue to sell their brands and generate cash, she will never have to sell.
She has learned that dividends are more predictable and reliable, and that income is more important than short-term share price movements. Receiving dividend income within weeks of buying shares also helped remind her of the long-term plan.
Investor Insight 3: Price fluctuations are irrelevant if you never plan to sell
She thinks about buying companies like buying a diamond engagement ring. Before you buy the ring, you may shop around for high quality at a reasonable price. Once that ring is on the finger, the daily price fluctuations of diamond prices are no longer relevant because you have no intention to sell it.
She thinks about share investments in the same way. She wants to buy quality diamonds (shares) at the right price so that she can benefit from the ongoing rewards (dividends) for the rest of her life. She intends never to sell her shares, just like she has no intention to sell her diamond ring, which is why she tries not to look at daily price movements.
Investor Insight 4: Don’t be distracted by daily news
The barrage of local and international news is distracting. Stories about exchange rates, politics, petrol prices and share price movements can cause anxiety. She has learned to avoid emotional responses to the press and to focus on her investments in companies that won’t disappear. Her portfolio consists of global companies that own great brands.
Investor Insight 5: Income, compounding and fees are essential to understand
She discovered many investment products don’t usually talk about income that investments provide. She loves seeing her dividends paid to her month after month so that she has a constant flow of cash to reinvest.
She understands that dividend income from her investments allow her to buy more shares and earn even more income. Investment geniuses, like Warren Buffett, use this compounding effect to build wealth. The fees she pays are also transparent.
Investor Insight 6: Understand what you are buying
Many of the companies she owns sell familiar brands. She understands these consumer products as she uses them every day. It is easy for her to understand these companies because she has experienced their brands. She does not understand commodities, bonds and other financial instruments.
While the AXIAM team performs all the research, financial analysis and executes all the trades, she still has an affinity for the companies she owns without the obligation to become a financial analyst.
At AXIAM, we believe in sharing knowledge with our investors so that they may grow as their wealth does. We aim to help our clients turn their capital investment into an annual income through long-term investing.
We have spent many years growing wealth inspired by the wisdom of successful investors. We buy shares in companies, that pay regular, increasing dividends, that own great brands that are known and used around the world daily. We intend to hold, and ideally never sell, the assets we buy. To learn more about our investment philosophy, sign up for our newsletter, or contact our fund management team to invest.