Good Investment Habits

Good Investment Habits
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Unless you hit the lottery, chances are you’ll be working for your money. You can make that money grow by investing it, which, in effect, makes your money work for you. Though some people see investment as a sort of lottery — you pick a good bet on the stock market and get rich — the truth is that successful investing comes down to practicing good habits. The earlier you start using these habits, the more successful you’re likely to be.

Be a Wise Guy

The more information you have, the better your investment decisions will be. Get smart by learning about bank accounts, interest and debit and credit cards, then move on to studying investments. This education should never end. Develop the habit of expanding your investment knowledge regularly. Taking courses or reading books will deliver the information in an organized way. Investment information is available in many places, including the library and the Internet. However, don’t force yourself to slog through books or sites you don’t like. Choose enjoyable, interesting sources instead to maximize the learning experience.

Pay Day

When money comes in, pay some of it to yourself. Putting that money into a savings or investment account will help you build a brighter future. Your bank or employer might make this easier by automatically taking money from an account or paycheck and depositing it for you. If you put money into a company-backed retirement account, your employer might even chip in by matching your contribution. Although paying yourself first may be challenging if things are tight, putting away even a small amount will help keep the habit alive.

Risky Business

Investments involve taking risks, but those risks can be managed. Two habits can help you minimize potential losses. First, practice diversification -- that is, don’t invest all of your money in one place. By habitually spreading your money between different kinds of investments, a loss in one won’t wipe you out and gains in other investments might make up for a loss. Second, invest consistently over the long term. For instance, investing in the stock market consistently would allow you over time to buy stocks when prices are lowest and sell them when prices are high.

Never Fear

When investing, emotions can be troublesome. Purchasing stock means buying shares of a company. The more you own, the scarier it will feel when the company experiences setbacks. While fear might push you to sell, keep in mind that impulsive behavior can damage your chances of investment success. Practice using your head, not your heart, when making decisions. Avoid emotional triggers such as over-checking stock prices. The Securities and Exchange Commission warns that daily checking is probably too often because stock prices tend to yo-yo. When feeling impulsive, remember your investment knowledge. Decisions shouldn’t be based on one factor alone, no matter how excited or afraid it makes you feel.