If you want to find some good ways to improve your investing game, you’ve come to the right place.
Relate Your Investments to Your Goals
Even though some strategies are certainly better than others, there is no one key formula. Using the investment strategy that’s specific for your specific situation requires you to evaluate your investments against the backdrop of your goals.
You can start by asking yourself why you’re investing and what you hope to achieve. Your answer will tell you how you should invest and help you if you’re interested in being a better investor.
The goals you have dictate your asset allocation, your time horizon, and your tolerance for risk. thus, analyzing what you want to accomplish helps you gain some insights on critical factors that determine where and how to invest.
Reevaluate Your Plan and Goals Regularly
Goals also change along with time. When such changes happen, you may have to update your investment strategy to reflect that.
That doesn’t mean you need to tinker with your investments on a monthly basis. It means you should take the time to reassess your plan every year and see if your investments still align with your goals.
You may have to answer questions such as the time when you finally want to use the money you’re investing. Check if anything has changed with the way you think about risks and if you are still diversified.
These things are very important to consider. Meanwhile, reviewing your investments doesn’t automatically mean you have to change something. There are times when the best action is to take no action at all.
Risk Tolerance and Risk Capacity
Risk tolerance refers to the amount of volatility you can handle in your investments. With high risk tolerance, you take on big swings in your portfolio. You’re comfortable living with potential risks of losses and you are confident enough to ride out any market storms without panicking.
Risk tolerance is not the same as risk capacity. While risk tolerance is pretty subjective, risk capacity is objective. It refers to the amount of risk that you can actually take with your investments and that’s determined by the amount you need to take on to meet your goals.
Diversify Your Portfolios and Accounts
As we all know, diversification within your investment holdings that make up the portfolio is very crucial. Diversifying the types of accounts where your portfolios live in is as important.
You can start by investing in 401(k)s and IRA. These accounts do limit when and how you can use your holdings, on the other hand. Since you can only into these accounts without penalty at retirement, you might want to consider where else you can invest money to grow wealth for other important aspects and stages of your life before or beyond retirement.
Become Self Aware
Good investors know how to set up a plan and stick to it over time to build their wealth. They find a way to reach some success in the market. But the greatest investors have the self-awareness to recognize when they could benefit from having a fiduciary advisor on their team to provide guidance, advice, and navigate around the investor’s own blind spots.
