Bure Valley Group is an investment introducer business which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.
Investing is a never-ending process of learning. Over time, as you grow your asset base, you also grow your knowledge. As such, even the most experienced of us should be asking: “How can I become better at investing?” Doing so holds out the potential for great rewards – not only financial ones, but also in terms of self-fulfilment and personal growth.
How can one become a better investor, however? That’s what our team attempts to answer in this short article. We hope you find this content helpful. Find out more about our EIS and other investment opportunities by visiting our portfolio page here. To enquire regarding our latest projects and funding, you can reach us via:
+44 160 334 0827
Learn about psychology
Please don’t hear this as recommending that you undertake a psychology degree (although if you want to, go for it!). Rather, what we’re highlighting here is how human behaviour regarding money is hugely impacted by our thoughts, instincts and values. Growing your understanding of how these work and influence your decision-making as an investor, therefore, is a powerful way to improve your decision-making as you spot your harmful psychological and put measures in place to mitigate them.
The classic example here is Loss Aversion – i.e. the well-known human trait that leads most of us to “feel losses” more acutely than rewards. For instance, the “pain” caused by a 50% loss on an investment is usually more memorable to us than a 50% gain. This is why many people are risk-averse with their investments and sometimes avoid higher-risk opportunities which could bring more wealth growth in the long run. Understanding Loss Aversion in your own mind can be helpful when evaluating an investment opportunity such as a startup. For example, you can ask yourself: “Am I hesitating because there’s a problem with the business plan, or am I reacting disproportionately to the thought of losing some money?”
Expect drops/losses as well as gains
The stock market fell dramatically earlier in 2020 when the pandemic spread across the world and investors started taking notice. Some pulled out of equities altogether as they watched their pension fall in value, putting their capital into “safer” assets such as cash or bonds – crystallising their losses in the process. Even experienced investors can forget that markets and company investments often fall. This complacency was certainly widespread in January 2020 when the stock markets had finished an 11-year bull run since the 2008-9 financial crisis. Growing as an investor involves solidifying this understanding about the nature of investing within the core of your philosophy – and to make wise investing decisions accordingly (e.g. diversification).
Remember the famous story
The tale of the Turtle and the Hare is so well-known that it’s lesson often falls on deaf ears – i.e. that patience triumphs over rapid, short-term attempts at success. This can be particularly hard for angel investors to navigate, since investing in startups does involve a shorter investment horizon compared to, say, committing contributions each month into a pension. Yet even these shorter-term investments need to be put into a long-term perspective. Even if you are invested in a startup for 3-4 years, for instance, where do you see it in 5-10 years? How might it change in performance over that time, and what can you do to mitigate the impact of potential failure on your wider portfolio?
Read & research widely
Academics grow by reading the works of others. Athletes improve by studying the lives of role models, sports strategies and human anatomy/biology. Investors are no different. Honing your skills in preserving and growing your wealth is ultimately best-served by finding great content which grows your understanding about how investing works, who does it well and why. Some might find value in studying fund performance, whilst others might benefit from subscribing to successful investors who publish regular video tutorials on YouTube. Of course, one of the best ways to learn is to surround yourself with other successful people and ask them questions. It could even be worth finding an investment mentor – especially if you are considering entering a new area of investing where you lack knowledge or experience (e.g. real estate).
Conclusion & invitation
Of course, there are many other ways to grow as an investor. One common recommendation is to not make your portfolio too complicated (so that you’re unaware of what’s going on). Another is to try not to micromanage your portfolio every day, and to change it only if your personal goals and circumstances develop. Remember the quote by Eugene Fama: “Your money is like soap. The more you handle it, the less you have.”
Others suggest periodically checking the costs you pay on your investments (e.g. fees on your funds) to see if these can be lowered. Some will also propose being careful with the news you watch, since headlines can lead investors to make impulsive short-term decisions.
Interested in finding out more? Get in touch today to start a conversation with our team and discuss some of the great investment memorandums we have available here:
+44 160 334 0827