What should you do if your investments are not performing as well as they should? Here are three easy-to-implement tips that can help increase your success in investing:
Get into a mindset of strategic thinking. You are more likely to make successful investments if you follow a proper strategy (financial plan), rather than constantly putting out fires (selling volatile investments). One of the main causes of poor investment performance is frequent trading, since every transaction has fees associated with it and people often make poor trading choices. So rather than selling/buying every time you smell danger or a great deal, create a specific plan and stick to it.
The first step in creating a financial plan is to define your personal goals. Having “enough” money to enable a comfortable life is nice, but isn’t a goal in and of itself. Click here for a free worksheet to help you create specific strategic goals.
Look at your levels of risk
If you’ve set your goals and drawn up a financial plan with an advisor, but are still anxious about your investments’ performance and your eventual financial success, examine your levels of risk tolerance.
If you simply can’t stand volatility, consider reducing the levels of risk on your investments. Even if it seems more prudent to have a certain element of risk in your investments, if you can’t handle it emotionally, then don’t do it. Money should never be a cause of constant stress. There are ways to protect the real value of your money without incurring too much risk. Ask a professional advisor for suggestions, and sign up for the Rich As A King blog to get periodic actionable ideas.
Strive for the initiative
When handling your investments – or your money in general, always strive for the initiative. In chess, having the initiative means controlling the pace of the game; in money, it means taking charge of every step of your investing. You have many tools at your disposal to gain the lead.
For instance, you can decide how much money to save and spend each month. If your savings strategy calls for a $500 monthly mutual fund purchase, for example, though the fund may have good years and bad, you can put this self-payment at the top of your priority list, thus ensuring that you maintain decision-making power.
By following a balanced approach of strategic thinking, defining clear objectives and taking the initiative, you can increase your chances of achieving financial success.
Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You A Grandmaster of Investing, avid chess fan, international investment advisor and Certified Financial Planner (CFP®).