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Enjoy a successful investment experience

Following 10 principles will help propel your financial portfolio to the next level.

Enjoy a successful investment experience
Past performance does not reliably predict future performance.

Are you confused about what to do with your investments given all the turmoil in today’s world? If so, you’re normal. Most busy veterinary professionals lack the interest, inclination, knowledge and experience to manage their investments. Those so inclined would be wise to get a second opinion. A financial adviser should be a fiduciary, meaning someone legally required to look out for your best interests and not his or her own.

So, is successful investing available only to those working on Wall Street? Absolutely not. Here are 10 timeless principles that, if followed, can improve the likelihood of you having a successful investment experience and increasing the odds of success over ever-changing market cycles.

1. Embrace Market Pricing

The stock market is an extremely effective information-processing machine. Billions of dollars are traded every day on worldwide equity markets — the 2018 daily average was $462.8 billion. With each trade, the buyer and the seller agree on the price of a security at that time. The result is real-time processing of all available information that arrives at a fair price. In today’s age of 24/7 news cycles and the internet, gaining an information advantage is virtually impossible.

2. Don’t Try to Outguess the Market

The efficiency of markets works against anyone (individual or mutual fund managers) who attempts to outperform the market with superior stock selection or market timing. You might have success in the short term, but repeatedly guessing correctly is extremely difficult. A study of U.S.-based mutual funds for the 20-year period of 1999 to 2018 revealed that only 23% of equity funds and 8% of bond funds outperformed their respective benchmarks for the full period.

3. Resist Chasing Past Performance

Choosing your investments by finding mutual funds with superior past performance is tempting. The problem is that past performance does not reliably predict future performance. A study of the period 2008 to 2018 tracked equity mutual funds that finished in the top quartile (best 25% of performers) for the previous five years, and it found that only 21% of those went on to finish in the top quartile the next five years. In other words, only 5% of funds could claim to have top-quartile performance in each five-year period.

4. Let Markets Work for You

Generally speaking, investment patience is rewarded and impatience is punished. Warren Buffett said, “Capital (financial) markets have a very efficient way of taking money from short-term investors and giving it to the patient ones.” Now, the money you might need to use within the next two years should be kept in low- to no-risk accounts such as bank deposits. Beyond that, if you hope to outpace inflation, equity and bond market investments should be part of your plan, and you need to plan to be patient through the inevitable market downswings.

5. Know What Drives Returns

A wealth of academic research has been done into factors that truly affect investment returns. If you realize that your expected return is based on current prices and expected future cash flows, then you can use that information to pursue a higher expected return on your investment funds.

Academic research identifies three factors that drive expected returns for both equities (stocks) and fixed income. They are:


  • Company size: Market capitalization (small vs. large)
  • Relative price: Price/book equity (value vs. growth)
  • Profitability: Operating
  • profits/book equity (high vs. low profitable)


  • Term length: Interest rate sensitivity (short term vs. long term)
  • Credit quality: Issues of high vs. low quality
  • Currency: The currency of issue

6. Practice Smart Diversification

“Don’t put all your eggs in one basket” is central to a successful investment experience. Diversification, by holding securities across many market segments, can help manage/lower your overall risk. The financial press does you no favors by only quoting the daily performance of the S&P 500 and the Dow Jones Industrial Average, which contain just 500 and 30 stocks, respectively, all U.S.-based. For example, a measure of the worldwide equity market is the MSCI ACWI Index, which contains 8,722 stocks from 47 countries. In recent years, U.S. markets have outperformed international markets, but over longer periods, global diversification has been advantageous. In an increasingly global economy, many good investment opportunities can be found outside the United States.

7. Avoid Market Timing

Equity and fixed-income markets are made up of many subsegments, such as large, mid, small, value, growth, U.S., international, real estate, emerging markets, corporates and governments. The fact that past performance of a mutual fund is no guarantee of future performance holds true for market segments. The performance of these market segments varies greatly from year to year and is historically random. By holding a broadly diversified portfolio, you are well-positioned to capture returns wherever they occur.

8. Manage Your Emotions

A strong determinant of investment success is investor behavior. Many people struggle to separate their emotions from their investing. Markets can go up and down rapidly. Reacting emotionally to current market conditions often leads to poor investment decisions. Most humans are hard-wired to be lousy investors because we buy when we are optimistic, which is when markets are up. Conversely, when we are discouraged, nervous or fearful, which is when markets are down, we sell. The winning formula is “Buy low and sell high.” Unfortunately, executing that strategy requires us to act exactly the opposite of our human nature and emotions, and few people can do that.

9. Look Beyond the Headlines

The financial press is no friend to investors. Daily market news and commentary makes sticking to an investment discipline challenging. Messages are often conflicting or overwhelmingly negative. They stir anxiety about the future or tempt us to chase the latest investment fad, and they are short-term focused. Most importantly, the financial press has a bias toward alarming and negative headlines. Such stories grab our attention and attract readers, viewers or clicks, which is ultimately how the press makes money. Finally, the financial press cannot know your individual circumstances, goals and time frame, and it therefore cannot be relied on to guide your financial decisions.

10. Focus on What You Can Control

We recommend this:

  • Create an investment plan based on your needs, time frames and risk tolerance.
  • Structure a portfolio along the factors that drive higher expected returns.
  • Diversify within markets and globally.
  • Watch and manage expenses, turnover and taxes.
  • Stay disciplined and unemotional through market dips and swings.
  • Ignore the noise of the financial press.

A financial adviser can offer expertise and guidance to help you focus on actions that increase your likelihood of success. A certified financial planner is a good place to start. Importantly, also look also for an independent registered investment adviser, a fiduciary who acts in your best interest and whose first step should be to create your financial life plan.

Your adviser needs to evaluate the best path and products that will meet your needs and wants. You don’t want someone who tries to sell you the product of the day.

Financial Wellness co-columnist Bob Crew is a financial life planner with Triune Financial Partners. Learn more at www.triunefp.com. Fritz Wood is a veterinary industry veteran with a special interest in finance. He serves on the Today’s Veterinary Business editorial advisory board.