It’s good to have an improvement mindset: this makes you a better investor. Even the top-notch financiers of the world seek to hone and refine their craft. If you’d like to polish your strategy and handle your accounts with more finesse, consider these simple (and sometimes overlooked) techniques for becoming a better investor.
1) Step Away from Your Portfolio
It’s not easy. And yes, it could be downright difficult. But the simple reality is that the more time you spend dwelling on your portfolio, the more likely you are to make changes to it that are costly and unnecessary. In fact, if you keep your portfolio under a microscope, you’ll go mad watching every uptick and downtick. Don’t obsess over this. It’s as simple as that.
2) Avoid Emotional Decisions
Investing should never be reactionary. You do not want your portfolio fueled by emotions. Avoid choices made out of doubt, fear, elation or uncertainty. Gut feelings will not guide you well here. Be methodical and be thorough in your investments. Be cold and calculating. Ensure you have a system in place for vetting yourself, whether you’re buying or selling. Protect and follow that system for every sale and purchase made.
3) Understand the Intrinsic Value of Time and Money
As retirement age looms ever closer, the more valuable your time and your money become. While you may be able to recoup lost funds with new investments, you’ll never get one precious minute of time returned back to you. Begin scaling back your lifestyle and your spending to accommodate the realities of your pending financial future. Understand you typically have just a set amount of money designed to last a specific amount of time—neither of which are infinite.
Time and money are crucial so find a way to conserve both. People live much longer after retirement than they have in the past. The closer retirement approaches, the more important it becomes to handle financial matters by doing the following:
* Paying off your mortgage
* Eliminating credit card debt
* No longer relying on credits cards (future debt) for purchases
* Adjusting lifestyle spending
* Downsizing your home and vehicle needs
* Reducing wasteful spending
4) Ignore the Hype; it’s Bull
Some people call it “keeping up with the Jones” or shiny new object syndrome. Whatever you call it, you can’t be the investor you need to be when you allow yourself to pursue every new trend or when you have to purchase the latest gadget. The crowd is not right, don’t follow them. Instead, follow your investment plan and stay true to it. Make sound choices based on the criteria you’ve established and nothing else. That way, the shirt on your back will stay there.
5) Invest in Quality
Scan the landscape for quality investments that meet your approval criteria. Absolutely resist the temptation to lower your standards just to grab an immediate opportunity. The right investment is the one you looked for, planned for—maybe even hoped for—not the one that just happens to be knocking on your door.
6) Take Responsibility for Your Investments
Like the song from Lynyrd Skynyrd, be simple enough to know what you’re doing. Don’t invest in what you don’t understand. Even when people you trust and admire are investing in questionable propositions, you shouldn’t. Take a breath, take a moment and take a step back. That new opportunity before your eyes probably isn’t going to vanish instantly. Take the time to thoroughly learn about it before you consider it. If it fits your plan then go for it. Otherwise, leave it. Be accountable to yourself to keep your plan in place. Simple is wise. Be simple enough to stay your course without diversion.
7) Take the Small Steps before Making the Huge Leaps
“You’d better look before you leap still waters run deep” is more than song lyrics; it should be a way of life for you as an investor. Enticing as they may appear, don’t immediately dive into the shark-infested waters of stocks, bonds and mutual funds. Instead, build your stride and your momentum with a smaller, measured pace that includes 401(k) plans, IRAs, and other similar and reliable funds. Lay a solid foundation for your own financial house before jumping into the big leagues of riskier investing.
8) Don’t Expect Instant Results
Investments do not revolve around instant riches or instant wealth. Instant gratification is not your friend and ally in these ventures. You’ve sometimes heard the phrase, “It’s a marathon; not a sprint” in terms of investing, because that’s the reality. The odds of instantly striking it insanely rich are far worse than the odds of winning the lottery; neither of these approaches are healthy for anyone with reasonable, long-term investment goals.
Once you ponder these steps and implement them, you’ll discover that the man in the mirror has become a far better investor than he once thought possible. When this happens, it’s then appropriate to raise the stakes and seek out bolder opportunities as you continue to improve your strategies and safeguard your funds.