The Winning Mindset

The Winning Mindset

Hector De Leon (Save-and-learn.com)
April 6, 2009

A critical ingredient to investment success is to have the right mindset of who you are, what you want, and what you need to do. Most of us know what we want, some, with proper planning, know what to do, but a lot of us fail to realize and accept who we really are.

Here is a typical telephone conversation between an investment solicitor/banker (Jill not her real name) and a prospective investor (aka Mr. Belle not his real name either).

Phone rings…

Jill: Hello, May speak to Mr. Belle please?

Mr. Belle: This is he. Who is this please?

Jill: Good morning Mr. Belle. This is Jill from JMC-Duart Investments, and I’m calling to ask if it is possible to see you in person regarding an investment proposition.

Mr. Belle: What kind of investment are you carrying?

Jill: JMC-Duart is principal distributor for an assortment of mutual funds that have varying degrees of risk and potential returns.

Mr. Belle: I already have mutual funds. What is the average return on your stock fund?

Jill: In the last three years our equity fund has averaged over 16% net for shareholders.

Mr. Belle: Hmmm, that’s quite impressive but the market is really bad right now so I don’t think this is the best time to get into equities. In fact, just recently, I decided to redeem my equity mutual fund shares to limit my losses. The fundamentals are bad and the technical indicators are not very promising either. I don’t want fixed-income investments either because interest rates are currently too low. Call in a couple of months. If the timing is right, I might consider meeting with you to find out more about your funds.

What went on during the conversation? Well, in a nutshell, Jill tried to sell Mr. Belle mutual

fund shares but Mr. Belle felt that the timing is not right. Furthermore, Mr. Belle is an aggressive investor and considers only high yielding investment. He is also the type of investor who prefers to manage his own investment portfolio.

And what does Mr. Belle do for a living? He sounds like a banker, an investment officer, perhaps a stock broker or maybe he is a fund manager. Actually, Mr. Belle is a BALLET INSTRUCTOR. He knows a lot of the investment jargons because he is genuinely interested in investments so he reads a lot. But does that make him a professional fund manager? Not quite.

A fund manager is a different kind of animal (no pun intended). Upon waking up in the morning a fund manager would look for the morning paper before his sleepers so he can catch up on anything that might have happened while he was asleep. He or she will have breakfast while reading the business section, somehow be able to take a shower while still reading, and drive to work still reading the paper (Don’t Try This at Home). The only time he lets go of the morning paper is when gets to the office and he comes face-to-face with his best friend in whole wide world - his Bloomberg terminal. He then spends the whole day in front of the monitor to watch the markets go up and down, up and down, . . . . . up and down all day long. After work, he goes home, has dinner, maybe a couple of drinks and goes to sleep. While asleep he will dream of the markets going up and down, up and down, . . . .up and down all night long.

I am of course exaggerating. My point is this. A fund manager eats, sleeps, breaths, and lives in the markets. He is capable of doing things with the markets that ordinary people can not do - like shoot an order to buy or sell a security at the snap of a finger (or at a click of a button if he or she does not have an assistant) and more importantly, stay emotionally unattached to the markets.

So if you are NOT a fund manager by profession then don’t fall into the trap of trying to think like one. The best thing for you to do is to THINK LIKE AN INVESTOR and let your fund manager do his job.