DIY Investor Magazine
| August 2017
42
THINGS A SUCCESSFUL TRADER DOESN’T DO!
As more and more people turn to DIY investing
there has never been such a wealth of information
and education available to help you make informed
investment decisions; neither has there been such
sophisticated technology at your disposal.
Social media offers the opportunity to exchange
ideas and information and many investment
platforms allow users to set up portfolios that mirror
those of investors they particularly admire and
replicate their trading activity.
However, there are core behaviours and disciplines
that underpin successful investors and you may
wish to give them due consideration as you seek to
join their ranks:
Successful investors
don’t start without a plan,
any more than they would start a road trip without
at least a map and a destination in mind. The
evidence is overwhelming that random investments
made without a plan seldom, if ever, lead to
success.
Your investment plan doesn’t have to be fancy, but
it should be based on where you are (your current
financial situation), the risks you are prepared
to take and your destination e.g. a comfortable
retirement by a certain time in your life.
Your plan should call for specific action steps you
will take. Successful investors expect to reach their
goals over time, by identifying the right things to
do, and then doing those things over and over and
over. Saving money regularly is the most basic of
these useful behaviours.
Successful investors
don’t rely on just one
investment
, or even a handful. They diversify
widely, knowing it’s impossible to reliably predict
which investments will go up in value and which
will decline.
Diversification doesn’t reduce risk, but it spreads
your risk around. Over the long run, this will make
your ride less bumpy and more comfortable. And
that will make you more likely to stick with your
plan. In addition, greater diversification often leads
to higher returns.
Successful investors
don’t ignore how much they
pay
for investment services and products.
They keep their costs low, knowing that is one of
the few parts of the investment process they can
actually control. Over time, those “little” savings
matter more than you might think. On a one-time
investment of £10,000 that returns 8% over 20
years, cutting your annual expenses by 1% would
boost your return to 9%. That would boost your
ending value from £46,610 (8% for 20 years) to
£56,044 (9% for 20 years). That puts an extra
£9,434 in your portfolio - nearly as much as your
entire original investment!
Successful investors
don’t let the ups and downs
of the market throw them off
course. They
realise that downturns and even bear markets
are normal—and that weathering these storms is
necessary for long-term success.
They do their best to stay the course, avoiding
panic buying when prices are going up and
steering clear of panic selling when the stock
market is tanking. This isn’t always easy
emotionally, but it’s vital to your long-term success.
