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8 Tips for Becoming a Better Investor
The World’s Best Investment
It's mind blowing how humans spend 2087 hours (on average) a year working for money but forget to spend even 1-houring on how to invest and grow that money.
Remember, you will never be good at anything you don't pay attention to. Pay attention to money. It may be the root of all evil but it's also the root of your freedom.
Talking about world’s best investment, I always like to refer Warren Buffet, the world’s great investor. And let’s be honest….there is a reason Warren Buffet is considered as the world’s greatest investor.
Before revealing you my top eight tips for becoming a better investor, I want to discuss these powerful concepts that every investor’s should know.
What is investing?
"Laying out cash today in order to get more back in the future." Sounds simple. But think on the implications. That means you must have a level of stoicism to forgo present pleasure for future gain. This is not a trait that comes natural to any human. If you were lucky your parents taught you to eat dessert after you ate your broccoli. Science now proves that this type of rewiring of the brain (the ability to postpone pleasure) must be done if you want any chance at being someone who accumulates real wealth.
Knowing the price to pay for an investment:
"The value of [anything] stock, bond, business, [real estate], [gold], is determined by the cash inflows and outflows, discounted at an interest rate, that can be expected over the lifetime of owning that investment... So all financial assets become economic equals... Neither the advent of the steam engine, the harnessing of electricity nor the creation of the automobile changed the formula one iota - nor will the internet. Just insert the correct numbers, and you can rank the attractiveness of all possible uses of capital throughout the universe."
Buffet is saying you must rise above the crowd. The crowd is always asking "What's the next, best, great investment?" That is a fool's game. There never will be one. The fundamental value is neutral. Gold isn't a better investment than real estate or the stock market. It's not worse. Tech stocks or oil and gas isn't better or worse than owning restaurants.
It all depends on other factors...
The devil is in the details. People will make money (and lose money) in real estate, gold, stocks, bonds, businesses, oil, entertainment, art, clothing, food, hotels, restaurants, cars, and even in magazines.
If you don't believe me look at the Forbes list of the world's wealthiest self-made people. They made it in all kinds of different ways.
There is no ONE investment.
That's the lottery ticket mind-set that will make you poor.
You must be objective, cool-headed, asset neutral.
The money is made in other ways.
The 8 Tips To Become A Better Investor
Remember, every wise investor wants to be a better investor. Even the best in the world seek to constantly hone and refine their craft so they can become better. These 8 tips are simple, though often overlooked, and they will help you become a better investor.
1) Step Away from Your Portfolio
It’s not easy. It might be downright difficult. But the more time you spend dwelling on your portfolio, the more likely you are to make changes that are costly and unnecessary. In fact, if you keep an eagle eye on your portfolio, you’re going to go insane over every bump or dip in the road. Don’t over monitor your portfolio. It’s as simple as that.
2) Avoid Emotion-Fuelled Decisions
Investing should never be a reactionary event. Avoid making decisions based on fear, doubt, uncertainty, or elation. Be methodical in your investment actions and have a system in place for vetting investments – whether you’re buying or selling. Have a system and follow that system for every buy and sell order.
3) Understand that Time and Money Are Equally Valuable (and Finite) Resources
The closer you get to retirement age, the more valuable both time and money become. It’s important to begin scaling back lifestyle and spending in order to accommodate your new financial reality. It’s equally important to understand that you typically have a set amount of money to last a specific, rather than infinite, amount of time.
Find a way to conserve both resources as people are living much longer after retirement than they have in the past. The closer you get to retirement, the more important it becomes to take care of financial matters by doing the following:
* Pay off your mortgage
* Eliminate credit card debt
* Stop relying on credits cards
* Adjust lifestyle spending
* Consider downsizing your home and auto
* Reduce wasteful spending
4) Ignore the Hype
Some people call it shiny new object syndrome. Whatever you call it, you can’t be a leader as an investor if you’re following every twisty or turning trend the crowd jumps on. Follow your investment plan. Make sound investing decisions based on the criteria you’ve established and not on what it looks like everyone else is doing. Otherwise, you might all find yourselves walking around shirtless.
5) Invest in Quality
Look for quality investments that meet your criteria and resist the temptation to lower your standards in order to just make an investment. The right investments are the ones you’re looking for, not the first one to come along.
6) Take Responsibility for Your Investments
Don’t invest in things you don’t understand just because others, even people you respect and admire, are doing so. Take the time to learn about the investments you make before investing in them and then make investments based on the plan you created for investing from the start.
7) Take Small Steps before Making Giant Leaps
Before diving into the shark-infested waters of stocks, bonds, and mutual funds, take smaller steps that include 401(k) plans, IRAs, and similar, stable retirement funds. Get your own financial house in order, before diving into the big leagues of big time investing.
8) Don’t Expect Instant Results
Investments are not about instant riches or instant wealth. You’ll hear the term, “It’s a marathon; not a sprint” often in the world of investing, because it’s true. The odds of striking it rich instantly are even worse than the odds of winning the lottery – neither of which are good for anyone with reasonable, long-term investment goals.
Once you get these steps down, you’ll find that you are the better investor you want to become. At that point, you’ll want to raise the stake and look for new areas where improvements can be made.