Keeping Your Focus on How to Be a Successful Investor
April 21, 2022 - Reading time: 6 minutes
Today’s digital age provides an abundance of information about business and investment. Investors rely on this information to make sound investment decisions to become profitable and grow their wealth. Investing is like betting in which the key principle is to minimize risk while maximizing profits.
This article provides several ways to keep investors like you on track with your investment strategy and help you remain focused on your investment goals.
Additionally, getting assistance from Asenaadvisors.com may also help you create a more robust portfolio so that you can get the most out of your investments.
Ways to Maintain Focus on Investment Success
There are several ways to maintain focus on your investment objectives and create a profitable portfolio.
Look for Opportunities in Cycles
Many investments go through cycles of high and low moments. While some of these cycles last for months or even years, eventually, the prices undergo a reversal.
For example, some investments have seasonal highs and lows, so you can plan out your strategy for buying and selling based on these recurring cycles.
Suppose you are focused on building a long-term investment strategy. In this case, cycles may throw you off, especially if you cannot take advantage of those highs and lows on time.
Despite this situation, there are still opportunities in cycles that may benefit you even if you are a long-term investor.
You may think of cyclical reversals as regular occurrences and not something unexpected. Like the recent COVID-19 pandemic that shocked the global economy, some cycles may be considered a reversal.
The point of looking for opportunities is so that you can make informed investment decisions without getting caught off-guard by sudden or unforeseen economic changes.
Consider Long-Term Investment
Many forecasts, especially the larger and more detailed ones, need to be viewed with a healthy amount of skepticism. The more complex the prediction, the higher the possibility that such forecasts may miss the mark.
If you pay too much attention to forecasts, you may become confused and overloaded with information. This situation may affect your ability to make sound investment decisions.
In addition, focusing too much on volatile markets may cause you to make constant adjustments to your investment strategy. While some people are well suited for this method, managing this portfolio may require much effort.
If you prefer a more straightforward investment strategy, consider investing for the long term.
Some investors may find short-term market movements challenging to get the timing right. In this case, creating a long-term investment plan may be preferable.
Take Advantage of Compounding Interest
Compounding can help create a high value for your money, especially if you consider compounding as part of your long-term investment.
This concept involves reinvesting the interest you are making on your investment to increase wealth generation than if you only reinvest your initial principal.
The Securities and Exchange Commission in the U.S. provides a free compound interest calculator if you need to make calculations.
Suppose you invest $100 in bonds that generate 8% interest annually. By compounding, in ten years, your investment will amount to $215.89. If you keep your investment going for another ten years, you will receive $466.10.
If you are young and healthy and decide to maintain your investment for 50 years, your money will amount to $4,690.16.
Suppose that you contribute $10 every month to your initial $100 investment. In ten years, you will get $1,954.28, and in 20 years, you will receive $5,957.53.
In other words, the longer you invest your money and continuously reinvest the interest, the greater your returns.
Buy Low and Sell High
You profit from your investment when you sell your stocks or bonds at a higher price than you bought them. This scenario is the basic concept of buying low and selling high.
However, in the real world, many people do the opposite. For example, investors may buy stock in the green or after a rally, likely expecting the price to increase further.
Then when the market collapses and the stock price falls, these investors sell in the red, hoping to cut their losses.
This scenario often happens when investors base their decisions on their emotions. For example, investors may feel happy when they buy stocks they think are doing well and panic when prices collapse and are forced to sell.
Being a successful investor means avoiding this situation or reducing the chance that this happens to you and your portfolio.
Research a stock’s historical performance or read company news to be more informed about the stock’s possible future movements to avoid or minimize potential losses.
Diversify Your Portfolio
Sometimes, you need to spread your assets to avoid heavy losses to your portfolio. This method is called diversification.
If you invested in three companies and one of them experiences a stock crash, the other two may offset your losses. This strategy may help prevent you from going into the negative.
During the early days of the COVID-19 pandemic, the S&P 500 index plunged, contributing to heavy losses for many investors. If you were among those investors, you might have experienced a minor loss if you also invested in less vulnerable firms.
Look for Investments With Stable and Sustainable Cash Flow
Some stocks are volatile or may have valuations or forecasts that are too obscure to understand. If you are investing long-term, you may prefer to stay away from these types of stocks and focus on companies with stable performance.
In most cases, these stable companies are part of the stock market index. The index is composed of representative stocks that investors use to determine the market’s overall performance.
Aside from index companies, also research the performance of other stocks and review their price movements to determine whether these stocks are an excellent long-term investment.
Maintain a Simple Investment Strategy
While having information may be seen as an advantage, too much information may cloud your judgment and lead to more confusion rather than understanding.
To keep things manageable, stick to a simple investment strategy. Focus on a few, but credible details are crucial in today’s world, where too much information and opinions about investments may create confusion.
Learn how to distinguish credible news and investment information from sensationalized articles and clickbait. This way, you can prevent or minimize the chances of getting thrown off by wrong information.
Conclusion
There is plenty of information available to business owners and investors. Deciding which information is most helpful to you may improve your investment strategy and grow your wealth.
The ways to maintain your focus on investment goals listed in this article are not exhaustive, and there may be other strategies that can also work for you.
Consulting with a financial advisor to determine what strategy and investment plan best fit your investment is highly recommended.
By Fay Smith