In the third installment of our advice series, one TD leader shares how he learned to make smart investments instead of chasing quick wins.
By Kelvin Tran
Senior Vice President and Chief Auditor, TD Bank Group
There's an old adage in sports that your team is never as bad as it looks when it's losing, and it's never as good as it looks when it's winning. Chances are, the reality lies somewhere in the middle.
The same may be said about investing. Or, at least about how some investors see themselves.
In a bull market, when the market tends to be on the upswing it's easy to gain confidence and start to feel invincible, playing the market and making money.
But if the good times end, and the market starts to slow – and eventually it does – it may become harder to beat the crowd. And those hot stocks to watch start to dwindle.
This is my story. I thought I could pick the winners. I was wrong.
Like so many people, I have fond memories of riding the dot com boom of the late-1990s. I was young, and having fun picking stocks. At the time, it seemed like anything connected to the Internet doubled and tripled in value.
I embraced risky decisions. I bought small cap stocks. It seemed everyone at the time had a new company worth betting on; some internet company with a plan to revolutionize some part of the world. It was thrilling, and exciting.
Unfortunately, I was new to investing, and didn't have the experience yet to recognize that I wasn't always going to have the magic touch, that not every stock I picked was destined to be a winner.
Not only did the dot com boom soon reveal itself to be the dot com bubble, I also realized after looking at all my investments holistically – that for every winner, I had a loser. The winning stocks were just outsized in my mind; I was focusing on the positives and downplaying the stocks that didn't pan out as I had expected.
If I could go back in time, I'd tell myself to forget about riding the roller coaster. I would tell myself that it's better to identify quality investments than to try to capitalize on every hot stock tip.
I'd tell myself that a smart investment strategy can be one that is built for the long-term and doesn't chase quick wins. A good investment strategy can be one that seeks to invest in well-run companies that can offer returns for the long term.
Over time, you realize that one of the reasons it sounds like everyone is a genius during a hot market is that other investors may be reluctant to talk about the lemons in their portfolio. Most people want to tell you about the great investments they made, but rarely are you going to run into someone who will tell you about all the unlucky or unwise decisions they made. And when the market is hot, and it seems like everyone is making money, it's easy to feel like you're the only one missing out.
The reality is that a prudent and thoughtful investment strategy is something to aim for at any age.
The smarter thing for me to have done when I was younger would have been to invest for the long term instead of just picking hot stocks.
When I hear friends or family talking about the hottest investment opportunity or stock of the moment, I'm reminded of those days early in my life as an investor, and I remind them that they should thoughtfully plan an investment strategy that is aligned with their goals, at any age.
The statements and opinions contained herein are those of the author and do not necessarily reflect the opinions of, and are not specifically endorsed by, The Toronto-Dominion Bank.