CLIENT LOGIN
LETS TALK
4 Key Values When Investing
4 Key Values When Investing

(“4 Key Values When Investing” is part of Developing a Core Set of Beliefs series.)


“Develop a core set of beliefs that guide your decision making and you hone your analysis skills until you are an expert. That’s what developing a core set of investing beliefs means and that’s what YHB Wealth helps you do.” 

1. Avoid obvious areas of over valuation.

This one is intellectually easy, but emotionally very tough. You’re probably thinking, “of course I wouldn’t buy something that is obviously overpriced”. However, unless you do your research, how will you know if what you want to buy isn’t already at extreme levels of valuation? When you don’t do proper research, chances are greater your emotions will take control, and you’ll be enticed to pay too much.

2. Give Yourself a Good Margin of Safety.

When you analyze any investment, don’t just look at what could go right, make an honest assessment of what could go wrong. The more cyclical the type of investment, the larger your margin of safety should be. If you can imagine the worst that could happen with the investment during the time period you hold it, determine what margin of safety you are comfortable with from that low point, and you can honestly say you are ok with that reality, then you are entering the investment with a good understanding of the total amount of potential risk.

3. Have a Long Term Time Horizon.

This is another one that is tough for many people to practice, usually because they mistakenly think they have to be doing something in their portfolio all the time in order to be successful. In fact, it’s more likely just the opposite. You’re not creating wealth if you’re constantly trading and experiencing large amounts of turnover. Some funds turn over almost all their holdings every year. If you are buying shares of individual companies – great businesses that are consistently growing their earnings, dividends and free cash flow, why would you want to sell them just because the price of the stock went higher?

If you inherited $10 billion dollars and could go out and completely buy several really well run companies, business that have a long track record of providing excellent products or services to their customers and creating wealth for the owners, you wouldn’t sell them just because the value increased over time – would you? If they are good businesses, you would expect the value to increase. So, why would you treat your ownership of stock in publicly traded businesses any different?

4. When you can’t find good value – then wait.

John Templeton – one of the greatest investors that ever lived used to say, “when you reduce your standards of quality or price, you’re more likely to make a mistake”. Wait for the attractive values to come to you. Warren Buffett calls it “waiting for the fat pitch”. But that doesn’t mean you should be doing nothing in your portfolio. Take the opportunity in between finding attractive values to re-examine your current holdings to make sure they still match the goals you outlined in the plan we discussed in point #1. Also, there’s nothing wrong with going back and buying more of a good investment if for some reason it has become temporarily undervalued in the short term.

These are the points of our core set of investing values. They’ve proven over the long term to be useful guidelines to increase the chance of achieving success for us, but they don’t have to match your set of beliefs. The key is to develop your own, and then stick to them. Having a set of guiding beliefs will help you avoid the risk of investing based upon emotion, which is rarely going to lead to success.

The YHB Wealth Philosophy

Disciplined investing focused on the long term. No one can predict exactly what the future holds, and we’ll never pretend to have a crystal ball. While we can’t eliminate risk, we do our best to balance smart investing while maximizing returns and minimizing taxes.

Our philosophy is simple, we combine comprehensive financial planning with tax-efficient investing so you can invest and grow confidently. We take a holistic approach to your investments, income, taxes, philanthropy, and estate planning to create a strategic plan that works for you, your family or your business.


About the Author

Randy has more than 15 years of experience managing financial assets for individuals, retirement plans and businesses. Randy joined YHB | Wealth Advisors in January of 2018 and serves as the Director of Wealth Management.  Prior to entering the professional wealth management field, he enjoyed building entrepreneurial business ventures from start-up to eventual sale and providing accounting services for public and private firms.

Connect with Randy

Questions?





CLEAR FORM