We’ve said it before; we’ll say it again: the markets don’t make us wealthy; our habits make us wealthy.
Investment success is primarily due to behaviour – not luck. As you will probably know, one of the mature investment perspectives reminds us that it’s not so much about timing the markets as much as it’s about time in the markets. This means we need strong resolve and a seasoned perspective to stick to healthy financial habits, especially when the markets don’t look favourable.
Clearly define your investment objectives
Investment is not a one-trick pony; investments need to be sorted according to objective and managed accordingly. We all have different goals with different time horizons, but smart investors know that different timelines mean different asset allocations and tax implications.
Know the difference between a trend and a classic
We are all driven by either fear or greed to some proportion. Chasing better returns on a hot tip or folding out of fearsome unknowns, can cause us to make numerous fund switches in a year. You may need to take a step back and decide what factors are driving your investment decisions. Is your portfolio diverse enough to ward off your fears and focused enough to reach your investment objectives on time? If not, let’s take a look and get you on the right track.
Find pleasure in saving
Buying things releases endorphins, resulting in a ‘shopper’s high’. This can be a tough habit to reprogram, but it is possible. Using retail therapy to cheer yourself up is not healthy for your bank balance – try to find satisfaction in saving, not just in spending.
Understand the power of passive income
Smart investors weigh up the risk versus the return. Dividends can be a good source of passive income, so can rental income. This is a key strategy to getting your money to work for you.
Have at least one long-term investment plan
Given time, investments compound, and a small nest egg can grow considerably in 40 years. Traditionally, this strategy is linked to retirement planning, but with the conversation around retirement changing as much as it has, view it rather as a long-term investing plan.
Habits are not formed overnight, but we can set our intention in a heartbeat. If we simply focus on the day ahead, we will be able to cultivate habits that are common to all cunning investors.