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Top 7 Advice for Any Investor

Updated: Apr 11, 2023

What a year in 2020! It was just over a year after I founded my minority women-owned investment management company. Then in January 2020, I informed people of the potential impact of COVID-19. That year I bought overpriced sanitizing equipment to ensure client meetings were safe. I donated masks to front-line workers, stocks and two cars to charitable organizations supporting the communities we share. And most people thought I was a nut. It is now 2021. My company is growing because our customer experience is unmatched due to the deep respect for each client's unique experiences and perspectives and putting my client's best interest first. As a result, it has raised my company's transparency and strengthened our client relationship. I feel fantastic. It still lights up my heart, and it brings me joy to see people thrive. The workload is unreal, but it has gotten me nothing but joy and fulfillment, and we're grateful to have been a part of our clients' lives. Do I miss my sleep? Not really, when I see everyone benefits.

Enough about my heartfelt opening. I am writing this blog to share my Top 7 best advice for any investor wanting to know what you should or shouldn't do as an investor. Each person's situation is unique. Do check with your trusted financial advisor, estate planning attorney, or CPA before implementing my advice.

1. Understand that we only have the potential for returns when investing because we take on reasonable risk. The possibility of a loss and volatility along the way are necessary parts of the equation, and we invest knowing that. There is always an inherent market risk related to your chosen model portfolio risk and return matrix. Diversification is a way to making a calculated portfolio risk.

Suppose you are not interested in investing. You also don't care about risk management and have no time horizon restriction or tax concern. You may not need a professional money manager or financial planner to build a customized investment strategy. If that's the case, you can pick a generic index fund or index ETF. I don't think you need to pick five generic ETFs to diversify when you plan to buy and hold, and you have no financial needs from the portfolio. A Total Market index fund would have an excellent exposure of all market portfolios. It will match the market return given the same market risk. Maybe you can also choose one or two stocks to take ongoing involvement.

2. Don't look at your portfolio balance every day. Why are you looking at your portfolio every day to create self-anxiety? Do your financial needs change daily? Stay focused on long-term growth during the chaos of up or down trading days. Retail investors tend to be hyper-focused on the prices of stocks and overacting to the market's noise. Calm yourself down and don't sell or buy a company out of a sudden gut feeling. I've seen two things happen when people are not careful to manage their investing emotions:

1. Becoming emotionally attached to the winning stock and reluctant to rebalance.

2. Becoming emotionally detached to a high-quality stock and sell quickly.

3. Don't invest all of your money based on a post from Social Media. Clients often ask me: Kimmy, this post from Reddit said that X stock would be HUGE; you will get me some, right? Investors or traders that get trade ideas from social media and other non-traditional sources are excited and confident on a good trading day. The next trading day, they panic or get confused, mainly because they were sold on a story but lack an understanding of investment fundamentals. Investing in a company based primarily on a storyline could get one financially stuck for a year or even a lifetime when it doesn't pay off.

4. Maintain a cash reserve. I suggest my clients have six months of cash reserve set aside for those still working and earning an income and 12 months of cash reserve set aside for those not working and without passive income (pension, social security, alimony, rental income, etc.). People often make this statement: The interest rate is low; my money earns more in the stock market; let's invest because I don't want to miss out. That's insane to think that way. What did we learn about the last pandemic shutdown or the 2008 recession? Companies were shut down. Many businesses halted operations with no set date to resume. Time was uncertain, and no one will tell you which month of the day this global crisis will stop or when the government will have a protocol to handle the disruption. If you didn't have any healthy cash reserve to live on during those times, you are forcing yourself to sell low to cash out for living expenses. Then, you'll miss the opportunity to recover. Even without a pandemic, the stock market goes through 10-15% correction from time to time. Therefore, having a cash reserve is your ultimate freedom and option. Having a cash reserve means that you don't need to paddle against the current in a volatile market.

5. Staying steady, focused, and fixated on investment discipline to pick a high-quality portfolio mix but rebalance regularly. Maintaining your discipline to sell good performers to lock in profit while rebalancing your portfolio within your tolerance risk and volatility is a time-proven strategy. Investment is not a fixed formula in my perspective. None of the mathematical formulas I've known would solve the riddle of day-to-day market volatility. I don't think even the best mind of an MIT Mathematician can. Based on what I've learned for the past 23 years in this industry, it is essential to prepare yourself with a defensive strategy and regularly rebalance to protect yourself from any major economic event or political crisis. Having a steady and focused approach allows you to find a new horizon and sail the wild sea with safety.

6. Investment is long-term, and it has to be diversified. Our investment philosophy focuses on buying companies with free operating cash flow, diversification of business revenue, strategic relationship with their customers with a sustainable product cycle, reasonable price to sales ratio, and practical considerations in ESG factors. Our portfolio tends to be globally diversified. We like management who've done a great job to trim expenses, streamline the production process, and generate free cash flow and immeasurable results. But, understand that no company can achieve these goals overnight. Therefore, investment is long-term. Not all good ideas are always profitable. You need to diversify. I agree that innovation and new ideas should never be ignored. However, it should also align with your individual needs and financial circumstances. I think it is OK to participate with no more than 5% of your total investable assets on a new idea, as long as the rest of the portfolio is healthily diversified in various industries and asset classes.

7. Always Think ahead. Don't let your underlying beliefs holding you back. What can we learn from COVID? What will be a sustainable business practice for future humanity? As much as we'll see job hiring improve this year, many businesses with old operational models might remain closed permanently. I hope I am wrong because my underlying belief does not wish to see it happen. But sadly, work automation is here to stay. When I was in high school in the '80s, my entire school, with 280 students in Hong Kong, had no computers. In 1998, when I first entered the financial industry, broker had to call a market maker to clear a commodity trade. Today, almost every household has a computer, and the market maker is an intelligent robot. Learning from the past, I don't believe this economic recovery will perpetually help all the labor markets to recover. It's a fantastic year for the tech sector, but I don't know if the tech market will hit a new high this year. The domestic fintech market is already stunningly large. Perhaps, technology can trade sideways this year until more people realize technology is the way of life.

For example, last year, conducting a virtual event was a great innovation and a critical business survival strategy. Still, it is not the same as real-life interaction in maintaining human relationships. Nevertheless, planning an event to meet 100 people demands resources, time from a group of employees, and investment. But honestly, how many of us are fed up with watching a sports game online. How many are annoyed with our children learning virtually with no practical hands-on experiences? Therefore, I believe some customer-engaging industries will rotate into the center of focus this year.

In conclusion, the advice I share with you today is the same approach I run in my company. We utilize social media to offer ongoing financial education for a broad-based audience. I also write organic content in my blog to share what goes on in my mind. I hope you will find this article helpful.

If you are interested in learning more about our services, you can request a free consultation.



There are no warranties implied.

The information provided is for general information and educational purposes only and is not directed to any investor or category of investors. No information contained herein should be regarded as a recommendation to engage in or refrain from any investment-related course of action, and is not an undertaking to provide impartial investment advice. Individual investors should consult with a financial, legal, tax, or other personal advisor about whether any investment strategy, product or services described maybe appropriate for your individual circumstances.

All investing is subject to risk, including the possible loss of the money you invest.

Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. We recommend that you consult a tax or financial advisor about your individual situation.

KW Wealth is neither a law firm or a CPA firm, If you have questions concerning the meaning or applications of a particular tax law, you should consult with an attorney or a CPA who specialize in this area. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Any views or opinions expressed may not reflect those of the firm as a whole. KW Wealth Management reserves the right to amend or change the content at any time and for any reason at its discretion.

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