Developing good habits takes time but they are an important part of investing. Due to how long it can take it is important that you start early and remain consistent. When it comes to investing we are talking about the funds you eventually hope to retire with so it is even more essential to remain on track. With great habits it isn’t uncommon for people to retire earlier than expected.
The first thing any investor should do is begin with their goals. A goal is the object of a person’s ambition or effort; an aim or desired result. By developing a goal with your money your investments can be structured around your goals. There are different types of investments that are more suited to different goals and their timeline. If your goal is to preserve income you will be investing in different products compared to someone investing for their first house. Investing is definitely not a one size fits all activity and a lot of time and effort has to be done before beginning and during investing.
Secondly all investors should regularly invest and review their goals. Especially at a young age when compound interest is on your side. Develop the habit of investing a regular amount that you can afford allowing you to take the emotions out of your investments. Knowing that a certain amount of money is coming out of your account every month or pay cheque makes it so you can adjust and budget for that decrease in your income and better prepare to live off of a smaller amount of money given that it is affordable, by investing in good products your money can increase substantially with very little initial investment. Regularly adjusting and checking in on your goals is also essential because things can change very quickly, your income may adjust to allow for greater investment which then allows you to reach your goal quicker or maybe the ROI that you had originally thought you were going to achieve is much higher now. Whatever the case checking in on your goals allows you to stay on track and be aware of everything going on with your money. Regardless if someone else is managing your money it is important to stay on top of things.
Thirdly, diversification is a key factor in any successful portfolio. Selecting investments that fit you specifically as well as being in multiple different asset classes allows you to have a well balanced portfolio that avoids large dips in value during a market correction. Those who were well diversified and stuck to their investment strategy not only were able to pick up undervalued stocks but also saw very large returns during the pandemic. Diversification is probably the most important part of any investment portfolio and it’s a very underrated part of investing. If all of your investments are in one sector you may enjoy the ride while that sector is successful such as financial services post pandemic but quickly that can change. A rule of thumb is that if your entire portfolio is in the green than you are probably not diversified enough.
Finally, emotionless investing. We have previously spoken about taking emotion out of investing but I will provide a quick summary of what we have previously spoken about. By letting your emotions rule and selling when your portfolio is down and buying stock when it is performing well you are playing a dangerous game that will only result in the loss of money in the long run. The most stress free and proven strategy is value investing. Buy solid funds/stocks and hold them for a long time. Weather the ups and downs of the stock market and you are sure to see an increase in capital.
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