How to stay focused when investing for the future
TRYING to achieve solid investment returns that can help you achieve a long-term goal like retirement, can be a daunting undertaking.
Many investors struggle to stay on-script and follow their financial plans, not knowing how much damage getting distracted can cause them financially in the future.
In challenging investment times like these, it is even more important not to get distracted by market noise.
Here are some tips to keep your investments focused and on track to achieve your goals.
Use hindsight as foresight
If there is one thing that the history of investing has taught us, it is that there are clearly lessons to be learnt from past mistakes.
As the saying goes, hindsight is 20/20, and the significance of events is often only revealed after the fact.
The key to becoming a smarter investor is to learn from those past mistakes and to avoid repeating them in the future. One of these lessons is that unchecked emotions are the cause of many ill-advised investor decisions.
Understanding the downside of being human
Often, investors’ own behaviour is their undoing. It’s important for you, as an investor, to understand the emotions that drive your financial behaviour.
Controlling impulsive decision-making and considering all the angles before making a move in your portfolio, will go a long way in making sure you reach your investment goals.
If you’re determined to make your long-term financial objectives a reality, you must embed processes and instill discipline to manage your own behavioural biases – or find someone to help you do so. A disciplined process is at the heart of better
investment outcomes.
Understand the nature of risk: it is key to being a better investor
One of the great mind shifts investors need to make is understanding the risk/return trade-off.
Risk can be your greatest ally when it comes to achieving your investment goals and objectives, but it can also be your biggest enemy.
Misunderstanding the nature of the risk you are taking on – or its potential impact – can have a devastating effect on your ability to build long-term wealth.
You need to understand that inflation is the enemy of long-term savers, and that to grow your wealth, you need to take on appropriate levels of well-managed risk.
Saving in perceived safe assets like the money market, or switching to them whenever there are signs of market turmoil, could potentially be disastrous to growing your long-term wealth.
Never put all your eggs in one basket
If you hope to make a success of your investments, you must either invest the time to upskill yourself or seek out a trusted adviser.
There are no shortcuts to achieving successful investment and wealth management outcomes – patience and good practices are the keys to a financially fit future.
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