Embracing Investor Mindset Amid Market Volatility

Here's another good way to think about investing when there is volatiliy.

If you own shares in Google as an example, you will see the price has dropped in last few days from $1,526 per share to $1,386 so does this spell danger or opportunity?

Well the first thing to do is to think about the investment properly. If you own shares in Google you should not be thinking about this as a bet on whether the company is going to improve or become more popular to invest in. That's trading and that mindset doesn't work.

You need to think about this as an investor which means you own a piece of the company. A slice of the cashflows this year and in future years belongs to you.

So if you are thinking like that, then you need to think about whether the cashflows in 5 years time are going to be affected by whatever is in the news today. The share price has gone down but is the future business any worse?

I would expect that Google will keep on growing cashflows from it's search engine, you tube ads, and cloud computing while probably developing new cashflow opportunities from businesses such as driverless technology. Nothing has changed in the last week.

Whatever is in the news today, or the recent share price movement is irrelevant unless you need to sell right now. If the price moves down it's not a reason to sell because in the short term the market is a voting machine, but in the long term it is a weighing machine.

If you can think of yourself as a business owner, you will be able to make much better decisions, and feel a bit calmer about things as well.

And Google is just an example to help explain an investors mindset. If you widen the scope to think about diversified funds the investor mindset is the same, except you are an owner of 100's or 1000's of companies, and lower prices will eventually equal more value for buyers, as long as the buyers have the right mindset to tune out the noise.