Tricks to Improve Your Investing Habits

Share:

If you want to improve your investing habits, you must do the following tricks. They work like magic.

investing tools piled together

Connect your Investments to your Goals

It’s quite tempting to think that there’s a secret formula which you can use to invest your money and ensure success. Even though some strategies are better than the others, there’s actually no universal solution.

If you want to find the best investment strategy for your situation, you must evaluate your investments in conjunction with your investment goals. You can start by asking yourself the reason you’re investing and what you really want to achieve.

The goals you set will help you determine the right asset allocation, time horizon, and risk tolerance. Thus, analyzing what you want to achieve helps you understand critical factors that determine where and how to invest.

Reassess your Plans and Goals Regularly

Meanwhile, you have to remember that things change. And when things change, you will sometimes find that you need to update your investment strategy to reflect that.

This doesn’t mean you need to alter your investments every month. What you do need is to take time and review your plan each year and ask yourself if your investments still align with your goals.

On the other hand, remember that reviewing your investments doesn’t always mean you should make some changes. There are times when the best move is to make no move at all.

Risk Tolerance and Risk Capacity

Your risk tolerance is the amount of volatility you can handle in your investments. If you have high risk tolerance, you can accept big swings in your portfolio.  You can probably live comfortably with unrealized losses and confident in your ability to ride out market downturns without losing some sleep.

hand on graph


Regardless of your risk tolerance, however, it’s not the same as your risk capacity. While risk tolerance is pretty subjective, the risk capacity is objective. Risk capacity refers to the amount of risk you can actually take with your investments. You can determine this by how much you need to meet your goals.

Diversify Portfolio and Accounts

Don’t forget to perform diversification and asset allocation within your investment holdings. Also, never forget to diversify the types of accounts that our portfolio live in.

You invest in 401(k) and IRAs, and those are pretty fine accounts. They do limit when and how you could use your nest eggs, on the other hand. And since you can only dip these accounts without incurring penalty when you’re retiring, you might want to think of other places where you can invest money to grow wealth for other important aspects and stages of your life before retirement.

Get Rid of Potential Venues for Human Error

Most ordinary investors underperform the S&P 500 because it only tracks the market. It doesn’t really make decisions about the next steps to take.  Investors are human and are prone to human errors driven by emotion. If you want to be a better investor, you have got to eliminate possible situations where you might have to make emotional and irrational decisions. It’s very wise to automate where you can.


FSMSmart is here to provide you with the latest news updates about market trends. Never miss out on news regarding forex, commodities, consumer, financial, and technology here in FSMSmart!