The Expertise of a Perfect Accredited Investor

The Expertise of a Perfect Accredited Investor

One of the most accredited analysts on Wall Street summarized, in ten points, the timeless rules that every accredited investor should know, keep in mind and apply, in order to operate profitably in the financial market. These points are particularly useful in this time of financial turbulence, which, as always, shakes the faith of accredited investors and pushes them to make mistakes they will regret tomorrow.

The Return to Media

Financial markets present long-term returns towards which they converge. Unlike deposit accounts or short-term bonds, whose yield is certain and constant, other instruments have variable rates from one year to the next, which eventually stabilize towards a certain level. Jeremy Siegel, for example, examined the returns of the US stock market from the early 1800s to 2012 and found that the average real performance is between 6 and 7%.

This gain, however, is by no means linear because, over decades, there have been periods in which the shares have made a lot (increasing the return above the average) and periods during which the gain has been negative (causing the return to fall below the average).

Over extended periods of time, however, the gain of any well-diversified financial asset class is positive and tends towards a positive, precise and constant value.

Excesses Are Never Permanent

When things go well for a long time, it is easy to think that tomorrow will be better than today. In the early 2000s, there was talk of a “new economic era” with continuous growth at low inflation. Phases of excessive euphoria and tremendous panic followed, creating speculative bubbles and financial crises. However, it is precisely at that point that the average return and over-compensation were triggered. After too-good years comes the fall, which in turn will be compensated by a subsequent rise and so on.

Unaware Accredited investors Buy High and Sell Low

Many accredited investors don’t know how to manage the investment process. Sometimes, they take too many risks than they are actually able to take. Other times, they let themselves be overly fearful. The fact is that it is very common for people to buy when the markets are at their highest and then sell when there is a decline.

The data relating to subscriptions and redemptions of mutual funds speak for themselves. When the markets are at their highest, the flows of money towards equity products increase and are emptied during the downturns.

If you have built a financial portfolio following my directions, you will know that the best choice is to do nothing.  Just wait for the storm to pass and do not make the mistake of selling after a fall.

Greed and Fear Matter more than Markets

Like a pendulum that continuously moves from side to side without standing still, the pathos of accredited investors oscillates between fear and greed. A disciplined investment approach is the key to keeping emotions at bay and preventing them from damaging long-term performance.

To keep emotions at bay, sometimes, a system of rules is not enough. You need the constant presence of a person to help you keep up with your performance and avoid making silly mistakes that you will regret.

If you’d like to read up more on more investment blog and what it takes to become an accredited investor, you can check out Real Vantage article at https://www.realvantage.co/insights/what-is-an-accredited-investor-ai/.


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