Applying "6 Habits of Successful Investors"

I continue to catch up on a number of articles and magazines that I often get and although most are used to learn and research themes that surround new ventures and potential, I also run into items that challenge some of my current thinking surrounding my handling of finances. It continues to become tough to keep up to date with the trends in personal finance as the media has become a large influence in the markets as in many other places. One of these articles was around thoughts about habits of successful investors.

I learned long ago that investing is key aspect of achieving financial independence as we cannot work for money forever as our minds and bodies have long term limitations. However, if we are able to accumulate capital and make it produce returns, they can quickly compound over time to work for you instead. Despite knowing the desired outcome, the path is for each of us to construct and execute as not everything works for everyone. There are some similarities in how successful people have achieved these goals in the past which allow us to at least create a foundation for our long term goals.

When I read this tips and recommendations I often look at how I can align them to my own endeavors and ensure they can be sustainable as well. According to the article, the following are the six habits of successful investors:

1. Develop a long-term plan and stick with it
2. Be a supersaver
3. Stick with your plan, despite volatility
4. Be diversified
5. Consider low-fee investment products that offer good value
6. Focus on generating after-tax return

In reviewing the list, I had generally thought I was relatively well placed but quickly noticed that I have had some gaps given my recent departure from the traditional financial system. My long term plan has been in place for years which is to basically not having any consumer related debt and save from 10-30% of my income for the future. However, I have often found myself departing from sticking with some aspects as I believe I can leverage knowledge to get better returns or reduce risk. Despite still being relatively young, I have only a small portion of my assets in risk assets given my thoughts on the current economy and monetary situation. This has definitely been an opportunity cost that has hurt my ability to accumulate capital in the last two years.

However, I remain a supersaver and continue to diversify into a number of uncorrelated assets which should help me maintain a risk/return profile that will be beneficial in the long term. Also, if my goal of substantially reducing debt in the next five years gets executed as planned, I will have a clear runway to achieve a larger acceleration of savings to accumulated capital in a short time frame considering my earnings power in not only my career but various ventures I participate in (including cryptocurrencies). Volatility has not been a real concerned as I have seen how volatile my favorite assets, cryptocurrencies, can be and think that it is a part of any early adoption investment.

One of the benefits I see continuing in financial services given the disruption that Fintech is having is the reduction of fees in many investment and banking products. Blockchain is also having an impact in this sector as we already see how it is efficiently storing value and processing payments in higher speeds and lower costs. Leveraging these advances will allow us to have better options to selecting were and how we invest our capital. I look forward to see how development in the cryptocurrency asset class will also bring these benefits along with an improved user experience for our journeys here.

Probably my weakness in these habits is the tax aspect. I try to leverage tax deferred accounts to my best ability but there has always been one feature I have never liked. The fact that most benefits are maximized after reaching a certain age is horrible in my opinion. To depend on reach a certain age in order to get tax benefits is kind of discouraging for me which is probably why I don’t have the same view. However, I do actively participate in them when I can to improve current effective tax rates. Maybe this is an area where I can improve on which has led me to even consider getting a professional review of my finances as we often out too close to our own decision to find areas of opportunity.

While each journey is individual, I am sure that fundamental approaches improve the likelihood of success so it is always worth reviewing goals periodically. The article mentions that “planning, consistency, and sound fundamentals can improve results.” I can agree with that as strategies like Dollar Cost Averaging and diversification have always balanced out the returns of my experiences. It was refreshing to have a good read and always consider ways to improve our financial goals over time.

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