In this column, CPA Community members are invited to share their expertise on key topics such as emerging accounting trends, accounting, fintech, and beyond.
As an accountant by training, and as a wealth advisor who has worked in traditional private banking and innovative WealthTech, I have learned one key truth in investing: While technology changes how we invest, successfully navigating the investing journey still depends on mastering a few core principles. Here are the three principles that separate disciplined investors from the rest.
Master market cycles, not news headlines
The financial market has a recurring pattern of economic expansion, recession, and recovery. While volatility is an unavoidable part of investing, the most common mistake is reacting to sensationalist headlines that amplify short-term noise.
Through every major event - the dot-com bubble, the 2008 global financial crisis, the COVID-19 pandemic, the S&P 500 rebounded immediately in a year, with five-year cumulative returns ranging from 50% to over 200%. The story remains the same: markets ultimately reflect long-term economic fundamentals, and patient investors are rewarded.
The disciplined investors don’t try to predict market cycles; they prepare for them.
- Know your risk tolerance: A clear understanding of your personal risk tolerance is what allows you to stay invested when markets are turbulent.
- Recognize market opportunity: Savvy investors know that not every market correction is a crisis, it can be an opportunity to acquire quality assets at a discount.
- Stay invested: Remember the golden rule: time in the market consistently and decisively outperforms timing the market. Your greatest asset is your time.
Build a resilient portfolio through asset allocation
Effective wealth building is not about picking a few winning stocks. It’s about building a portfolio where different assets such as equities, bonds, and alternatives work together as a team across various economic conditions. Asset class diversification helps keep us protected against risk while capturing growth.
Institutional investors have long embraced a disciplined approach blending liquid assets, such as stocks and bonds, with less common ones, such as private equity (investing in private companies) and hedge funds. These kinds of investments are considered “low-correlation”, as they don’t always move in the same direction as the stock market, helping them achieve long-term growth. For example, Harvard Endowment, one of the most long-term-focused investors, allocated over 70% of its portfolio to private equity and hedge funds in 2024. You don’t need to replicate their investment strategy, as heavy allocation to alternatives is not for everyone, but you can adopt the institutional asset allocation mindset in your own long-term wealth building.Apart from asset class diversification, true diversification also includes geographical diversification, sector diversification, and vintage year diversification. Meanwhile, a core-and-satellite portfolio management approach can help. The idea is simple: a core group of stable assets serves as your foundation for long-term returns, while satellite holdings offer the potential to enhance those returns.
Partner wisely with professionals
Finding honest, independent financial advice can be tough. Many people hesitate to start investing – not because they lack access to products or market insights, but because they’re unsure where to find trustworthy and personalized advice tailored to their unique needs.
To ensure you can find the right partner, you must first clarify your needs. In my experience, investors are typically seeking help in one of four areas:
- Competence: “I lack financial expertise and need a professional to build a tailored plan for my unique situation.”
- Coaching: “I have my own ideas but need an expert to act as a sounding board and keep me accountable to my goals.”
- Convenience: “I don’t have the time to manage financial complexity. I need a smart, simple solution so I can focus on other priorities.”
- Continuity: “I need a professional coordinator to manage my family’s wealth, ensuring preservation and smooth succession for the next generation.”
Once you identify your primary needs, you can better evaluate the different types of service providers available: banks, brokerage firms, and independent financial advisors (which include both human advisors and robo-advisors). Each has its advantages, and no single platform is right for everyone.
Finally, wealth management is a business built on trust, and the integrity of your human advisor matters. Start by understanding their incentive structure – whether they are commission-based or fee-based, making sure their interests align with yours. Also, watch out for red flags during conversations, such as pushing products without understanding your needs, lacking market insights, and avoiding discussions about risks and fees.
Finally, combine investments with accounting
Warren Buffett once said, “You have to understand accounting… It’s the language of business… but unless you are willing to put in the effort to learn accounting – how to read and interpret financial statements – you really shouldn’t select stocks yourself”. Understanding accounting gives you the advantage in navigating the investing journey. That said, few investors or professional accountants have the time to perform that level of deep analysis.
The good news is you do not have to become a master in picking stocks to become a wise investor. Ultimately, achieving your financial goals depends less on picking individual winner stocks and more on asset allocation according to market cycles – knowing when to embrace risk and when to go on the defensive. For most, this is best achieved with a hybrid solution, by combining the 24/7 access and convenience of a digital platform with the personalized guidance of a trusted human advisor. This allows you to automate simple routine tasks while reserving expert support for the complex decisions that shape your financial future.
Peisi Deng is a senior wealth advisor at StashAway, a leading digital wealth management platform with billions USD in client assets across Asia and the Middle East. She leads the high net worth business growth and develops strategic partnerships to expand the firm’s market presence in Hong Kong. Her expertise is shaped by a unique career spanning traditional finance and technology strategy. Prior to StashAway, her journey includes advising ultra-high-net-worth clients at J.P. Morgan as a private banker, and shaping growth strategies for top technology firms as a management consultant with PwC.
