I. Remain Long-Term Oriented A. Envision your retirement and the time-frame required to get there B. Be patient C. Practice mastery over self through discipline
II. Save a portion of earnings A. Establish automatic deposits into an investment account B. Stash windfalls of cash (inheritance, bonus, tax refund) C. Curb your consumerism
III. Invest in Assets A. Research and discover great businesses B. Diversify your assets to reduce risk C. Invest in yourself
Pillar One: Remain Long-Term Oriented
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” – Albert Einstein
The first pillar is the most difficult to master and thus the most important. Without a long term orientation the other pillars will falter. For example, if you are 30 years old and plan on retiring at 65, you have 35 years to go. Do not waste your precious time on daily news articles or claims that the “sky is falling.” We have a bias to think that “recent” news is “more valuable” information when in fact this is not the case. Media outlets and brokerages love to generate a buzz because it is good for their business; investors will check-in more frequently and trade more often, two things that hurt your performance. If you allow your long-term bubble to burst, your short-term mindset will take over and produce a plethora of mistakes.
In 35 years you should expect four market crashes. Use each as an opportunity to be more frugal and buy more stocks at a discount. If you are unsure about an individual stock holding during a market collapse, switch your holding with a market index fund during this time. This is based on the premise that individual stocks don’t always recover but markets do.
The biggest enemy of the average investor is quite often the person in the mirror! Surprisingly, investors don’t lack good ideas and insights, often times we lack the guts to see them through to fruition! We must get out of our own way and allow the power of compounding interest to work its magic. This is easier said than done, however, the investor who will produce the greatest return has a long-term oriented mindset with mastery over self. There is plenty of evidence that shows that increasing your time period of holding a stock is the best way to boost your return. Put simply: more time = more money.
Continue reading here: http://robinhoodstrategy.com/featured/three-pillars-of-successful-investing/
Submitted July 27, 2018 at 08:27AM by dmwes4 https://ift.tt/2K5RMla
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