Investing: Seven Effective Investment Habits

Investing money is a habit that most people find difficult to follow on in a disciplined fashion. Sometimes, people are confused on what to invest in and at other occasions people don’t know if they should start investing already or wait until a certain time in their life to do that. Also, there are many people who think that saving money is the best and safest strategy to pursue as far as investing is concerned because investing actively is risky.

Here, I have highlighted seven effective habits that positive, successful people cultivate to grow faster:

Pay yourself first: This simply means that you have to realize and separate out a certain proportion of your income every month to your investment portfolio. The idea is to prioritize this to the effect that this gets out of the income first – it’s easier for salaried individuals since they are somewhat sure about their salary and its timing, but this can also be extended to business people with some efforts on their end.

Start small: A lot of people hesitate to invest considering they just have a few thousand rupees, for instance, and say to themselves that they will start off when they accumulate some significant sum – the wakeup call: there will be no better time than today to start off. Even if it’s a fairly small sum, it’s all right to start off on the track to invest. Once you have started, it’s easier to add on and make it grow, but you have to start now.

Invest regularly:Some people start investing for a bit and then forget about that because of something else on their schedule. That’s not the right attitude. You have to take this as something needing mandatory attention on a regular basis. That doesn’t mean you are always spending 3-4 hours everyday to think about and do this, but it’s better to keep it as a monthly or bi-monthly practice and review after every 6 months against your goals.

Keep the final goal in mind:When investing, it always helps if you have a formal statement of purpose, often called an “Investment Policy Statement” or IPS. It’s a goals statement that any qualified investment professional can help you form, and with some attention and practice, even you can prepare for your own self. It helps you keep your investment strategy aligned to your investment needs.

Don’t change your portfolio very regularly – but do it every once in a while: If you’re looking at equities as a potential investment proposition and investing in them, don’t just juggle your portfolio everyday. Empirical evidence suggests that day traders earn lesser amount of money relative to semi-active traders on net levels due to the significant commissions that they have to pay on trading stocks.

Invest according to timeframe in mind:Are you thinking about investing for getting enough to go to your next holiday destination? or buying yourself a bigger car? or planning for your retirement? Your risk appetite would also be a factor of your time horizon. If you need to get out and cash your investments in a year, then it might not be worthwhile looking into strategies where illiquid assets are involve

Adjust for Risks: You have to realize that there is a term called risk-reward payoff. It applies to the investment world as well. In order to earn supernormal (above-average) returns on your investment portfolio, you would need to invest in riskier assets. Now, not everyone’s situations allow them to do so, therefore, it’s best to assess where on the risk spectrum you fall on and invest accordingly.

Happy Investing!

 

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