The Best Techniques To Become A Better Investor
According to a MagnifyMoney survey, about 66% of investors have made a reckless or emotionally-influenced investment decision they went on to regret. Investing is undeniably profitable if executed to perfection, but it is no walk in the park. Therefore, it is prudent to sharpen your investing skills to make smarter decisions to help you achieve your long-term financial goals. If you wish to learn more about becoming a better investor, consider the points below.
- Diversify your investments
Many experts agree that it is nearly impossible to predict which asset classes will be most prominent during any given time. As such, it is advisable to spread your cash across several investment classes. This principle is known as diversification, and it follows the classic principle of not putting all your eggs in one basket. Research shows that diversification lowers your overall risk and maintains or even improves your portfolio’s performance. There is no right approach to diversification since the best strategy depends on the unique individual and situation. However, you can generally diversify your investments by including a good balance of bonds, stocks, cash, and other investments in different asset classes and industries. Also, remember to diversify within broad categories. For instance, you can invest in real estate through syndication to spread your capital across different properties, states, locations, and tenants with other investors. You can click here to learn more about becoming a successful real estate syndicator.
- Don’t let mere talk alter your overall investment strategy
There is a lot of noise in the investing world that can easily distract investors from their tried and tested strategies. People are always talking about something— the Saudi Aramco IPO one day, the likelihood of a market meltdown the next, among others. However, these conversations are usually mere talk instead of insights worth acting on. Therefore, stick to your ideal portfolio mix that corresponds with your investment goals and risk tolerance. Then, periodically rebalance this portfolio to return it to its original proportions. This way, you will stick to a solid and profitable long-term investment strategy that gives the expected return on investment (ROI) instead of getting distracted by mere talk and encountering losses.
- Put your “financial house” in order first
You will be putting the cart before the horse if you wish to invest when you don’t have a budget, carry a lot of debt, lack an emergency fund, and so on. Therefore, put your “financial house” in order before investing to increase your odds of success. The Penny Hoarder estimates that over 55% of Americans do not use a budget to manage income. However, it is prudent to create one to free up money for everyday expenses and investing. Also, pay off your costly credit card and other high-interest consumer debt before venturing into investing.
Furthermore, build a reliable emergency fund containing three to six months of living expenses to prepare for rainy days. Finally, consider purchasing the right types and amount of insurance to protect yourself against financial setbacks. The right insurance will prevent you from raiding your investment account for cash during difficult times.