Category: Investment 101

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James Clear, author of the popular book Atomic Habits, put it best when he said:

“You are the outcome of your habits.”

It makes sense, right?

The habits you practice on a daily basis define who you are, which is why as an investor you want to make sure you are intentional about your habits.

Implementing the right habits can often be the difference between having a high net worth and losing everything overnight.

So, what makes for successful investing habits?

Here are five habits we believe differentiate the good investors from the great.

Let’s dive in.

1. Save and invest regularly

This is a foundational habit that every investor should be practicing: slow and steady wins the race.

Not many of us receive an unexpected inheritance or a big bonus to start investing with. Most of us have a monthly income along with our expenses and commitments.

That means that saving and investing needs to be part of your monthly budget. It needs to be regular and it needs to be a habit. How much? It depends on your goals, but investment experts recommend saving at least 10% of your monthly income. If you save and invest regularly, your investments will grow steadily over time.

Successful investors prefer saving and investing every month, rather than investing whenever they feel like it or when the market timing is right. Why? Because they are strategic bout how they invest. It’s not gambling.

2. Diversify your assets

Diversifying your investments is what allows you to minimise risk while increasing your overall return. It allows your portfolio to remain stable during a market downturn, or for your portfolio to grow even faster during a bull market.

The best investors don’t put all their eggs in one basket, which means they don’t put all their money in one asset or in one company. With diversification, you get a better balance between your risks and returns, and that helps you outperform those who don’t.

The best investors invest in both the stock market as well as alternative investments

3. Know who you are

The best investors know themselves.

Understanding your emotions and how you react to different market trends is a core investing habit. If you are someone who gets anxious when the stock market goes down, then it’s best not to invest in volatile assets. If you’re an investor who prefers managing your own portfolio, then you want to pick a strategy that allows you to be in control.

The funny thing is this:

You really won’t know what you’re most comfortable with until you do some experimenting.

That’s why it’s worth dipping your toes into various types of investments first. Once you do know what works best for you, you then want to create a plan and stick to it. This could be creating a specific asset allocation that fits your goals and needs, and setting a fixed monthly investing budget.

The best investors know how they react to market trends and set up a plan and strategy to fit their personality.

4. Invest long term

The most successful investors are in it for the long run.

That’s because they know that time in the market beats timing of the market.

So, if you want to make the most of your investments, you want to be maximising the use of compound interest. The first 5 years of investing won’t add a lot to your portfolio: but the last 3 years of a 30 year investing career will. That’s where the difference is.

The best investors are disciplined and stick to their plan – looking at the long term. Often, having a big goal such as FIRE or a college fund can help encourage long-term investing.

5. Set and forget

Unless picking stocks is your passion, most people want to set and forget their investments.

They don’t want to check the news every day, learn what a P/E ratio is and rebalance their portfolios every week. Most investors treat investing as an engine to grow their net worth and make more money, not as a leisurely pastime.

That’s why the most successful investors prefer investment strategies and assets that are low maintenance.

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The stock market can help you make a lot of money, if you invest knowing the nitty-gritty of the market. Here’s what you need to know

Never jump blindly into stock markets

It often happens that while talking to your friends and colleagues, the discussion heads towards the stock market, and also how the stock market helps investors make big money. You might never have invested in the market, but after hearing about all those things, you also decide to buy some stocks. This move is highly discouraged, because you are jumping in blind. You should invest in the stock market after getting the basic knowledge about it and in accordance with your financial goals.

Before making your first investment, take the time to learn the basics about the stock market and the individual securities composing the market.

Your focus will be on individual securities which you are investing in and the relationship with the broader economy and the factors that drive your stock.

Take out time to learn some of the basic jargons used in the stock market sphere

Invest only what you can afford to lose

The biggest mistake newbie investors make is to invest money that they can’t actually afford to lose. Investing in the stock market can be volatile, and that means that you can potentially lose or gain.

Like any investment, there are inherent risks associated with the stock market. Some are the risks related to the, while some risks are stock-specific that you can avoid.

You need to decide your own risk tolerance considering your age, financial strength, retirement goal, etc., and accordingly make your investment move.

Avoid herd mentality

Unlike many investors, you should avoid the herd mentality that is influenced by the actions of your friends, neighbors or relatives without evaluating the current information and underlying stocks. Thus, if everybody around is investing in a particular stock, the tendency for potential investors is to do the same. But this strategy is bound to backfire in the long run if you have not chosen the stock by careful analysis, that meet your interests.

So, if you really don’t understand about the stock, never step in.

Before investing in a company, you should know about its business. It’s important to only invest in businesses that are easy for you to understand, especially while you’re just starting out. Never invest in a stock. Invest in a business instead.

Choose a Professional Stock Broker

Well, it is true that a lot of investors have made profits through the stock market. But it was only possible because they’ve good market knowledge, made some really smart choices by adopting carefully thought of strategies, and are also much disciplined in their approach.

One best way to safely navigate the stock market investment terrain is by partnering with a trusted professional stock broker. Your broker will advise you on what kind of stock to invest in and what to avoid. Using their financial analysis skills, a professional broker can help you project if your investment strategy will be profitable in future or not.

Your loved ones are typically the No. 1 priority in your life, and that isn’t going to change. The best way to make sure they are taken care of after you pass is to establish an estate plan while you are still of sound mind. Here are the top 10 advantages of creating an estate plan:

It provides for your immediate family. 

An estate plan will provide enough money for your surviving spouse to continue to care for the family. If both you and your spouse pass, an estate plan will name appointed guardians to care for your children.

It will ensure your property goes to the right beneficiaries. 

Your estate plan will outline exactly where your assets are to go in the event of your death. This leaves no questions to be resolved by the courts or cause for family discord.

It minimizes expenses and taxes.

When you take care to create an estate plan, you should be able to keep the cost of transferring any property to your named beneficiaries. You can use your estate plan to set up a special trust for your children and grandchildren

It eases the burden on your family. 

It can be difficult to plan the funeral of a loved one when grieving. When working on your estate plan, you can outline your wishes for funeral arrangements and even set aside funds for them. This takes some of the burdens off your family during this difficult time.

To support a favourite cause. 

If you are passionate about a local cause or charitable organization, an estate plan can allow you to support them after your passing.

It can be used to plan for any incapacity. 

Life is unpredictable. If you should ever become mentally or physically incapacitated, an estate plan will outline your wishes regarding life and who will make medical decisions on your behalf.

It reduces taxes that take place on your estate. 

By crafting an estate plan, you should be able to minimize the amount of taxes collected on your estate, which results in your beneficiaries keeping more of the money you set aside for them.

It establishes trustees over your estate. 

You’ll need someone to serve as the executor of your estate to make sure everything is handled properly. Your estate plan will name this person, which will save money and simplify the administration process.

It provides for those who many need help. 

Do you have a child who has a disability? Or perhaps you have grandchildren who will be attending college in the future. Through your estate plan, you can set up a special trust to provide funds to support them.

Ensure a business continues with a succession plan.

If you own your own business, you’ll want to establish some kind of plan to keep it going after you pass. An estate plan will name your successor and outline what happens to your interest in the business.

As you can see, there is a lot that goes into estate planning, and none of these areas should be left up in the air. By working with professional estate planning attorneys, you can be sure you have thought of everything.

Without a will, your property may not go to who you want. Much of it can be tied up in probate for years, which means your family won’t get the assets they want and potentially need until it’s all settled. You can’t make assumptions that everything is going to go the way you want. Legal documentation is the only way to ensure your wishes are met.

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If you’ve received your year-end bonus for the year or you’re expecting it, it can be tempting to consider having a splurge in the name of Detty December or convince yourself you deserve an extravagant treat.

But before you throw caution to the wind and deplete that windmill, take some time to consider how you truly want to use it. No matter the size of your hard-earned bonus, you should think about how it can best serve you and your goals in the short and long term.

Here are 5 ways to use your year-end bonus to expand its benefits into the new year and beyond.

1. Pay off debt

If you have a high-interest debt running, a part of your bonus can help shave a part, if not all of it off. You’ll breathe easy knowing you owe no financial debts to anyone.

2. Grow your emergency fund

2020 has taught us one big lesson- always be prepared for emergencies. Throw some part of your bonus into your emergency fund or use it to create one if you don’t already have it. You want to have a financial cushion in case of life’s unexpected moments.

3. Invest in your goals

Whether those goals include putting aside money for your children’s university education, financing your business, renting a bigger apartment, buying a portion of land, getting an MBA abroad, and more; your bonus will help you get closer to achieving it.

4. Invest in yourself

Perhaps there’s a skill you’ve always wanted to learn – one that could help improve your earning power or land you an entirely more lucrative job? Use your bonus to develop that skill and that’s you investing in your future.

5. Diversify your portfolio

Been thinking of spreading out your investment? Now may be the time to go for it with this bonus. When you diversify your investment portfolio, you minimize the risk of loss such that if one investment performs poorly over a certain period, other investments may perform better thereby reducing the potential losses. You also open different sources for returns while in some cases protecting your capital.

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Now, let’s say you’ve got the above-mentioned covered and still have some impressive change to spare from your year-end/13th-month bonus – you can go ahead and give yourself the much-deserved treat and roll into the new year motivated to make a greater impact.

Click here to diversify your portfolio today or reach us via [email protected] for financial advice.