You may have heard stories about investors who have amassed a fortune with one investment decision; a colleague who bought Amazon shares back in the late 90s when they were only selling books, or a friend of a friend who invested in a handful of AI startups and is suddenly talking about taking early retirement.
Whether these stories involve people you know or are strangers you’ve read about or heard of in podcasts, you could be left feeling somewhat dejected and left out.
And yet, for every success story doing the rounds, there are many more that feature less fortuitous investors who chased the next big thing, only to see their money disappear when they realised they’d gambled on the wrong company or the hype has evaporated to nothing.
If you’ve seen the movie Dumb Money, about how one guy sinks his savings into the GameStop store, you know what we’re talking about – if it passed you by, it’s worth a watch next time you fancy a movie night.
The evolution of new technology or a brand new industry will inevitably lead to success and riches for some investors.
That said, if you’re a long-term investor (the approach Ascenta Wealth recommend), investing in a single company in the hope of being one of these “heroic” investors is foolhardy.
Not only are you failing to diversify your assets, but you’re also ignoring the point of investing: to reach your long-term goals.
And anyway, investing is not a competition.
You don’t have to make more than other people. You simply need to make enough to allow you to achieve your ambitions and live the life you want.
So, while it can be helpful to have some investments in future-focused sectors (such as AI), the wiser move is to find comfort in the fact that you’ll more than likely be better off if you’re not over-exposed with too much allocated to whatever’s deemed to be “hot” right now.
In fact, when it comes to what’s hot, every wise investor will be happy to sit on the sidelines.
Chances are, you’re not missing out at all
If there are stocks you wish you were invested in – Amazon, Apple, or the next big AI phenomenon – there’s a high probability that your diversified portfolio already contains shares in these companies – and may have since you began to invest in the markets.
The difference is that because you hold the shares in a fund, you’re less affected by every price movement. There’s little need to track it each day, so it’s easy to ignore whatever might be happening with a single share price.
While you may know people who monitor specific share prices and follow every movement on their favourite device, your investing experience doesn’t quite pack the same dopamine punch.
That’s because owning a stock within a fund means its movements are camouflaged by hundreds of other holdings in the same fund.
Instead of experiencing multiple highs and lows during any one day, week, or month, instead you enjoy a far more steady and grounded experience, as potential growth happens with zero drama or fanfare.
Instead of giving into the temptation to feel the rush of owning individual shares, take comfort from the fact that, over the long term, your tailored portfolio of diversified investments is more likely to deliver better returns.
Take comfort in your time-tested strategy
Now that you know you also own winning shares in your portfolio, you may still be wondering if you couldn’t also dabble in chasing one-off opportunities.
Here’s the thing.
You can focus on what you already know is working, or you can turn away and chase what appears to be working better right now.
As a mature and sensible investor, you’ll already know that your best strategy is to focus on the funds that have performed over time.
Ultimately, global equities have consistently rewarded investors across every technological change.
From the evolution of railways during the industrial revolution, to the digital revolution of computers and the internet, the best companies have figured out how to adapt and thrive.
Meanwhile, businesses that failed to adapt were invariably replaced by those that could.
The beauty of your diversified investment portfolio is that it’s able to capture the best of this type of innovation, without the need to second guess which companies will be lead change.
Realising your ideal investment position
Investors between age 40 and 55 are perfectly positioned to embrace this time-tested approach. This is because you have both time and life experience on your side – you understand the benefits of choosing wisdom over excitement.
With between 10 and 25 years before you retire, steady returns should prove more than enough for you to achieve financial security. In your peak earning years, and time to save consistently, there’s little need to take risks with your wealth.
Better still, you’re mature enough to understand and see beyond the latest hype.
You've experienced enough supposedly “revolutionary” investment opportunities to understand the pattern. And you know that whatever might feel urgent and exciting right now is unlikely to have a lasting effect on your long-term wealth.
This puts you in a great position – and should mean you’re perfectly content to remain on the sidelines as others chase the next big thing.
While others lose their heads, you can remain calm and focused on what’s always worked.
