Aug 14, 2020  | Tags: personal finance, Investment

Our Insights

Have you wondered what separates the highly successful investors from those only achieving average returns, or worse, failing?

No, it’s not sheer luck - the answer lies in their habits, which are engrained into their behaviours and investment strategy.

While investing itself can be a complex task, thinking and acting like an elite investor can be quite simple and easy to do – as long as you’re consistent.

The earlier you start with these habits the more successful you’ll be, so don’t waste anymore time and find out what habits you need to develop as soon as possible.

Investment habit 1: Research

The learning process never stops, especially when it comes to investing. Regularly invest your time into reading up on studies, observations and analysis on your selected industries and markets.

Fortunately, there's few limits to what you can learn. Information can be accessed through books, online articles, podcasts, seminars, videos … the list goes on. But with thousands of potential sources comes the need to filter through to the most accurate and reliable ones. Basing your investment decisions solely off a news article, a TV analyst pushing stocks or general media commentary isn’t enough to help you succeed, and could even have a negative impact.

Research is also about getting to know an investment BEFORE you invest. Take the time to study your investment options and fully understand what they’re all about, what risks are involved and consider any information in the context of how long you are planning to invest for. The more you know about an investment, the more confident you’ll feel about the investment decisions you make.

Investment habit 2: Focus on what you know

There are so many investment opportunities available, it can be hard to find the best ones for you. So always remember that knowledge is power, so your focus should be on the asset class and investment areas you know well.

There’s always greater risk when investing into a company or product you know nothing or very little about, or you have zero interest in. It makes it a whole lot harder to make sound investment decisions, especially when you don’t understand the impact an action or event within the industry will have on your investment, or don't have the ability to make sense of the relevant trends.

But if your investment journey does takes you into uncharted waters, it all comes back to research and gaining advice from professionals who can guide you through your strategy.

Investment habit 3: Diversify your investment approach

Don’t put all your eggs in one basket – diversifying your portfolio allows you to minimise your risks and increase your potential to succeed.  

Securing a mix of different investments across different industries will help you ride the ups and downs of the market and weather the storm of any major financial event. Remember that even in the toughest times, such as a global pandemic, there will be always be growth areas among the doom and gloom. 

So when you're setting up new investment habits, make sure you're regularly reviewing your mix. You can diversify the actual types of investments you have, such as stocks, bonds, property, cash and shares. You can also change up your investment style and the characteristics of your investments, such as their exposure across regions, their sector and size.

Investment habit 4: Save, save, save

Start saving early, and you’ll be amazed at the growth you see.

Aim to regularly accumulate your savings and contribute to your investment account every time pay day comes around.

We understand that circumstances change and you may not be able to put away as much on some weeks, but it’s still important to get into the habit of frequently putting away any size contribution.

A growing trend which is highly successful is to automate your savings – that way you don’t have to worry about manually transferring your money, and you won’t be tempted to spend instead of save.

Investment habit 4: Embrace the mishaps

Nobody is the perfect investor, and you’re bound to make mistakes or experience losses along the way. However, it’s how you react and move forward which separates the average investor from a thriving one. The most successful investors learn to embrace their triumphs and pitfalls, and accept these lessons as part of their investment process. 

Investment habit 5: Don’t let your emotions take over

Emotions can be a powerful influence on your decisions, and it can be easy for logic to be pushed away by fear or anxiety.

So, avoid creating bad habits around emotional triggers, such as overchecking and obsessing over daily stock prices or focusing on media commentary. Do not act impulsively or make rash decisions based on a dip in the market or a negative financial event.

Staying patient, and in control, is the key to success.  

Investment habit 6: Stick to your plan

Creating an investment strategy is important in helping you understand your situation, define your goals and establish the best pathway forward. But that’s only half the journey – sticking to your plan, despite any volatility in the market, will keep you on track towards your goals and avoid major losses.

If you can no longer handle the ups and downs of your investment portfolio, consider committing to lower risk investments.

Investing is a long-term game. Your plan will define your healthy investment habits, give you focus and help you avoid getting side-tracked or spooked by circumstances.

Investment habit 7: Get advice

The most successful investors work with a trusted financial adviser, who can help you build the best strategy for you, help you work through tricky questions and circumstances, and ensure that you're creating positive, wealth-building habits. 

While you can up-skill and train yourself as much as possible, working with an adviser will help you accelerate towards your goals. 

Talk to the team at Calder Wealth Management. Call us on (08) 8373 3333 to schedule your free initial appointment. 

Written by James Herriman for Calder Wealth Management.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own  circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent. Information is current at the date of issue and may change.