What does the expression “active investor” mean to you? Does it make you think of someone who is constantly buying or selling investments, and moving his money around from one place to another in hopes of generating a profit?
Here’s news: you can be an “active investor” even without actively buying/selling. Churning your portfolio will do you little good, and could actually create negative results. Simply buying or selling an asset in order to “do something” – as opposed to following your financial plan – is a serious financial mistake.
Active investing means making sure to put your funds in the most productive places you can find… even parking them there for the long term. Active investing is making sure your money works for you.
Active pieces on the chessboard
Being an active investor is similar to being an active chess player. How is that?
To take an analogy from the world of chess, consider the 1993 game when Susan Polgar played Vasily Smyslov. Here’s how Susan describes her win against him in Rich As A King:
“When I played Smyslov in 1993 in Vienna, I placed my white bishop near the corner in square g2, where it stayed for 20 moves. Without constantly adjusting it, nor trying to find a new idea, I just left this well-placed bishop in an ideal spot. The volatility on the board certainly made me reconsider my strategy, but I knew that having a solid asset in the right square would, in the long run, help me to succeed. And when I finally deployed this powerful piece, I was able to chip away at Smyslov’s infrastructure, gain a material advantage, and even sacrifice my queen in order to come out ahead and finally win the game. Though my bishop sat still for the first third of the game, it was well placed to achieve my plans.”
By placing her bishop in a crucial spot and leaving it there, Susan won the game. Even though the piece stayed still, it was active.
For more about how Susan used her active pieces to beat Smyslov, watch a two-minute video here.
Put your assets in the right places
When managing your investments, be an active investor by putting all of your assets into the most productive positions.
Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing, is an avid chess fan, international investment advisor and Certified Financial PlannerTM.