In order to grow your wealth, you must invest your money. Becoming a successful investor is not something that happens overnight. Learning the ins and outs of the financial market, as an investor, takes a lot of time and effort.
What separates a successful investor from the rest? Mentioned below are some of the most helpful investing tips to become a successful investor.
- Get started in investing
To be a successful investor is a journey on its own, it is not a one-time event. You will have to prepare yourself over a period of time in order to be a successful investor. Get your finances in order before you start investing. Nowadays there are some apps available where you can start investing even if you have some extra cash in your account
- Investment philosophy
It is easy to invest in hot stocks randomly, however, it is important for a successful investor to think of the big picture before and envision their goals before investing. You must decide what financial objectives you are looking to achieve, building up retirement savings, funding your kids’ financial needs, buying a house, etc. Being clear of your investing goals will help you stay on track and motivated.
When it comes to asset allocation, diversifying your portfolio can help you take control of the risk of market volatility. There are different types of assets you can acquire are bonds, stocks, real estate, futures, commodities, etc. Some of these require you to take a bigger leap of faith than others. When you invest in more than one set of assets, you make your portfolio diverse, and therefore, lower your risk. If possible, it is also preferred to diversify within each asset class as well. For instance, if you want to invest in stocks, you can go for stocks of companies from different industries.
- Do not worry about market volatility
Several times, naive investors buy a stock and later proceed to check if their stock has moved up with the market at all and feel devastated if it has dropped. It is crucial to realise that the daily highs and lows of the market do not matter in the long run. The daily volatility of financial markets is overshadowed by their overall upward trend over the years.
- Strategise your investment
No one knows your situation better than you do, therefore it is advised for you to do your own investing, with a little bit of help. A very useful behaviour model developed by fund managers Tom Bailard, Larry Biehl, and Ron Kaiser helps investors understand themselves better in order to invest better.
The model categorises investors according to two personality characteristics, method of action (careful and impetuous) and level of confidence (confident or anxious). On the basis of this model, an investor can be divided into five groups.
- Individualist: careful and confident. Have a do-it-yourself approach
- Adventurer: volatile, strong-willed and entrepreneurial
- Celebrity: follower of latest trends
- Guardian: wealth preserver and highly risk avoidant
- Straight arrow: shares the traits of all of the above equally.