There are 6 routines that highly successful investors engage in regularly and that differentiate themselves allowing them to act in a totally different way from the average investor. As a matter of fact the “winner” uses information that the average one does not consider in making his/her financial choices. It is not only the behavior that makes somebody a successful investor, it is mainly the information he/she access and uses that makes his or her investing habits dramatically impactful.
Here they are!
1 ) Learn how to invest on your own instead of handing your money to another person. Otherwise do a detailed research and give your money to proven investors with a long history of success and clarity on costs & fees
Self-reliance is the best way to make sure that no one is selling you the greatest fee or commission products or worse, incompetently managing your account. Index funds are the easiest way to invest and where you should start (see our previous articles). For example if you go with something like a Vanguard Lifecycle fund you just pay 0.15% in fees and you can immediately start building your portfolio!
2 ) Give yourself clear rules about ‘buy and sell’ … and stick to it
In investing, feeling and hope are both the enemy. If you end up being enamored with a stock or a financial investment and refuse to sell when it’s the time … for example when you’ve made very little losses or enormous gains … you increase the chances that the investment will turn from a great to bad one or from a bad to even worse one. Hoping that a financial investment will recover losses that are unanticipated is an unsafe game instead of having definite sell guidelines that you follow no matter how much you like a specific investment.
3 ) Find the right balance … Having a “rich” life does not only mean making money
The best players have an investment system that they have personalized according to their strengths and which they have actually spent time to learn. In this way investing does not consume their lives. Efficient investors have loads of success in their financial investment AND have adequate free time to spend time with their friends and families.
4 ) Don’t get in investment opportunities you do not fully understand only because another person tells you that there is no “disadvantage” with limitless upside
There is no such thing as a financial investment with no drawback. Always take the time to totally understand what you invest in. See rule number 1
5 ) Manage volatility (it’s not always bad) and take measured risks
If you want to get some serious gains (and not 2-3% flat returns)you NEED to take risks and invest in assets that have some significant volatility. At the end of the day, just your absolute returns matter. This may requires you to invest 15% (average) of your portfolio in much more risky assets then the rest of the 85%. Out of that 15% the chances are high that some will lose cash but at the same time the chances are high that some will end up being enormous gains.
The “winners” take extremely calculated risks in assets that have high levels of volatility to make returns that blow the average investor out of the water. In reality the conservative investor is taking the greater danger, since he or she has a much greater probability of never ever getting abundant. Successful investors, on the other end, guarantee that not just do they understand this principle, but that they successfully apply it as well. That’s why we suggest to invest in the stock market!
Betterment is a great option because they automatically diversify you across a whole set of investments based on your level of risk … It’s High risk, high reward is 100% stocks and 0% is the conservative approach with all bonds.
And please remember rule 1 … you need to be educated to make such investments.
6 ) Diversification is essential to reduce risks
The process is simple: a)Research different investment opportunities and assess their risks b)Understand the level of risk you can afford and you are willing to take c) Create your portfolio with a mix of assets at different risk level … index funds, mutual funds, bonds, stocks, real estate … d) Monitor performance and re-balance your portfolio when needed … and do not forget rule 2.
Follow these rules religiously and you will learn along the process and become a successful & wealthy investor!!
Are you investing? What are your challenges? Let us know!