Successful investing is a pretty simple formula. Set up your expenses to be less than you earn, and save the rest. Take your savings and invest in great businesses and hold for the long term. But that's easier said than done. Especially when others seem to be getting rich quickly from the latest "hot thing." In this clip from the Jan. 27 Motley Fool Live show, "Mindset" Motley Fool analyst Tim Beyers and Fool.com contributor Brian Withers discuss one question that can help you stay focused as an investor.
Tim Beyers: What goals are you trying to achieve here? When you feel the dopamine rush, when you feel the adrenaline, when you feel fear of missing out, when you feel like, and there was a question I saw about, "I'm afraid there's going to be a panic sell-off." Can I just reassure you right now, and I know this doesn't sound like reassurance. There will be a panic sell-off. I'm going to address that and I'm going to tell you why. I'm not going to try to invalidate your feelings, but what I will say is, because I recognize that's a fear, but I want to give you some information that you can process that may help you fear that a lot less. But I do acknowledge that's going to happen. It will happen. But you may not need to fear it as much as you might feel in your body that you have to feel it.
What are your goals? Jim, you're 70 years old. You see all this stuff. You see this crazy stuff that's happening in the market. Return to your goals; what is it that I'm trying to achieve? How much money do I need during retirement? Then anything that is answerable, answer those questions. Like, "I need this much over the next three years." Well, then one of your answers can be, "I'm going to take that money out of the market, I'm going to put it in cash." I mean, it's up to you. You need to know how to solve for your own goals.
But this question can just take all the nonsense. It just moves it over to the side. "What are the goals that I'm trying to achieve?" Focus on that and then you can come back to the nonsense if you want. But if you center on the goal, then it will very quickly put the nonsense to the side. This is something, by the way, just to go back to the metaphor, is this not something that Tom Brady is amazing at, like in a big game situation? Just like knowing the situation, knowing the goal. I mean, again, not a Brady fan. But if you took a look at the NFC championship game, knows the situation it's fourth down, knows what's coming from the defense. End of the first half, has a pretty good idea and says: "You know what? I know what could happen here, I know the situation I'm in. I know the Green Bay Packers are an incredible team. Let's see if we can put seven on the board." Boom, end-of-quarter, heartbreak touchdown, if you're a Green Bay Packers fan. It's just like keep your eye on what it is you are trying to achieve. Brian, any thoughts on that, anything you want to add there before we get to question number 3?
Brian Withers: No. If the goal is a big one, and I remember when I was first starting out that I was worried that I would never have enough to send my kids to college and continue to pay on the mortgage, and not only send the kids to college, but figure out how then I would get enough money to retire someday or fund the life that I want to lead instead of working until 70s, 80s, whatever. With that goal very far away and you're only saving a little bit, it's really hard to make just incremental progress.
I know some people have said "write down your goals and stick them in your wallet," or whatever. That's a hard thing to do over years to continue to invest. But I guess that's why these sessions are so great and that newer investors can take from experienced investors and say, "Be patient, give the system time to work." It does, and great companies, you can see companies like Amazon and Netflix and others that just execute well on the business. That they're going to continue to grow over time and be a bigger part of your portfolio.