Over the years, we have been asked on many occasions about how to become a successful investor and make the most money.
At Magenta we know that showing people how to get the most out of their time on the planet, is more important than making money, but also that having enough money to enjoy that time, is pretty important too.
So, we have put together a list of 12 common habits that the most successful investors share and we hope you recognise at least a few of these in yourself!
1. Focus on what you can control not what you can’t. Virtually no one can predict with consistency what the financial markets will do, so don’t waste your time trying.
2. Instead, get clear on your goals, develop a plan to achieve them and review it regularly. Work out what money you’ll need, by when and develop a plan to get you there.
3. Spend less than you earn and create an emergency fund for the unexpected (ideally 3 to 6 months of expenditure), so you have money to fall back on should you need it.
4. Think longer-term. Don’t worry about fluctuations of the stock market. Over the last 200 years, despite ups and downs, the stock market has been the best place for longer-term investment growth.
5. Do NOT trust your instincts. Rationally we should buy low and sell high, but our emotions may lead us to sell when markets tumble and buy when they rise. When fear and greed kick in, we can end up doing exactly the wrong thing at the wrong time.
6. Don’t keep too much cash. Holding cash for emergencies and shorter-term needs makes sense. However, cash can be a poor investment over the longer term as inflation erodes away its purchasing power, particularly in low-interest-rate environments.
7. Watch out for expensive investments. The higher the fees the higher your investment returns need to be to cover them. At Magenta, using low-cost investments is key to our clients’ success.
8. Save! Savings provide freedom and security. Whether it’s for a new car, a holiday, a new house, your retirement or an emergency – having money saved (and invested) gives you more financial freedom.
9. Pay yourself first. Always save money first (at least 10% of income) and spend what is left, rather than hoping you will have something left to save at the end of the month.
10. Don’t put off tomorrow what you can do today. Whatever your future plans, start investing now. You’ll feel better for making a start and crucially will benefit from compound returns – ie growth on growth.
11. Don’t try to time the market – it is never too high or too low to invest (how can we tell anyway?) Just make a start whenever you have sufficient funds to do so.
12. Seek professional advice to ensure you don’t make any expensive mistakes and be held accountable to your future life planning.
At Magenta, we can guide you towards these healthy investment habits – just call us for a friendly chat to find out how good investment choices can make a BIG difference to your future security and happiness.