When I first started investing, I didn’t have any goals. There was a desire to make money and a huge interest in the world of finance and investment.
And to be honest, my first experience did not change anything for me from a material point of view. Through trial and error, and also with the subsequent selection of favorite companies, I earned about 30% of the income from the price difference + dividends (from the end of 2017 to the end of 2019).
Next, I want to show why the pursuit of profitability is not the most important thing. And also focus on what really matters.
As I said, even having earned on stocks, I have not achieved anything and have not changed anything for myself. Why?
The answer is very simple:
I went to the stock market, did my job, made my profit, and left before the market crashed.
And on the one hand, I received more than I invested, but on the other hand, the capital I invested was insufficient for the income to seriously change my financial situation.
I am not opposed to the idea that profitability is an important criterion for evaluating investment performance. I am opposed to making profitability an absolute, turning it into an end in itself.
If we are objective and assess the reasons for the success of world famous investors (like Warren Buffett, Peter Lynch, Ray Dalio), then we can see two patterns —
What are the media and all sorts of news portals talking about? Who is the greatest outperforming the market. But no one says that they own funds (management companies) — this is clear to everyone.
Berkshire Hathaway is a business within the stock market. And in this business, the greatest investor made his fortune.
Above market returns are not a goal, but an action.
Let’s say there are people who save up for an apartment in this way — this is a goal with a concrete tangible result.
And there are those who want to form a passive source of income — also a worthy goal.
There are people who create and accumulate capital in shares for their children — this is the same goal, the fruits of which will be reaped not so much by the person himself as by his heirs.
In general, there should be at least one big global goal.
Otherwise, you will give up too quickly. Alternative scenario: investing from the path of gaining financial well-being turns into an endless race for profitability.
Beating the market is an unattainable goal, as you have to do it year after year.
Preserving and increasing savings is not a goal, because such a formulation does not clarify when you will achieve what you want.
After realizing your global goal, you need to calculate how much it will cost you (or other conditions). And based on this, paint a plan to achieve the goal (investment strategy).
Then it is worth identifying intermediate goals.
Their achievement will be confirmation that you are moving on the right path and have chosen the right strategy. A long absence of results, on the contrary, will require a revision of its strategy or individual components.
I have a global target:
The next global target:
Fortunately, both goals are well combined and do not contradict each other.
For these global goals, I have intermediate goals.
First intermediate goal:
The next interim targets are 2-12 monthly incomes.
Each interim target consists of a certain number of stocks of the companies I have selected + hedging risks in currency and gold.
And there is one additional purpose
Thus, I always know what and at what price I will buy, what and in what case I will sell. At the same time, my plan is not a rigid structure. It is flexible and can be amenable to change when it benefits capital.
Situation: shares dropped 5% in price. What has changed for me? Never mind. Perhaps I will buy more if the company pays good dividends and shows stable financial results, or has good prospects for growth.
For me, something will change if the company ceases to meet the requirements for my goals.
I earned about 19% in USDN only on the difference in the exchange rate + I receive daily income from staking this currency, 40% in Bitcoin, 140% in Waves (and also passive income from leasing) and 265% in Ethereum.
Almost nothing. Is that passive income from USDN and Waves meets the goals, but the profitability from the growth of the value of assets, whatever it is, does nothing, because it turns out to be insufficient to achieve global goals.
Then I sold some of the coins and with the proceeds bought shares in companies that were paying dividends. Did it change anything? Yes, because I took a small step towards my goals.
In this way,
In other words, there is no need to chase profitability — it is better to leave it to traders and speculators. The only thing that really deserves attention is the achievement of the set goals.
I pondered this idea for a long time until I saw the same thing in the stock market. Many people come here, but few manage to radically change their lives. For this, most do not have enough of the simplest — goals and patience.
One last time:
Therefore, set yourself global, but understandable and achievable goals. And let profitability serve those purposes.
Thank you for reading.