Financial success is more than just money in the bank. It’s peace of mind knowing that you’ve done the hard work— paid off debts, saved along the way, and have an investment portfolio that makes you feel confident about your money. In other words, financial success is more a way of being that a one-time win. But, it isn’t easy, and it’s an ongoing process.
Here are the greatest risks to your financial success to correct and avoid.
1. Not investing.
As Warren Buffet famously said: “Find a way to make money while you sleep, or you will work until you die.” Simply put, you need to use some of the money that you are currently earning to create more for your according future self. This is especially true because of inflation. Even so, young people in particular are weary of investing. According to a Gallup poll, only 37% of those younger than 35 invest in stock market. This is a drop from 52% in 2006-07 before the stock market crash. When done with intention and caution, investing can be a tool to wealth, and the sooner you start the better.
2. Not getting the right advice.
When it comes to investing, your motto should not be to go it alone. Whether your financial goals are to plan for retirement or to buy a really cool boat by the time you turn forty, the investment vehicles you use should be selected to help drive your pocketbook towards those goals. Not every investment vehicle is a fast car, however, some are more like slow and steady trains. And that’s okay, as long as you choose the right vehicle for you.
3. Seeking the big win instead of building a long-term strategy
The big win is an admirable goal--- and there are strategies to help achieve them. For example, value investing aims to identify stocks that are undervalued in order to make big gains when the stock’s value rises. Income investing seeks to generate an income stream from investments by purchasing bonds or stocks that pay dividends. And, small cap investing selects smaller companies based on a specified market cap. Everyone wants to make money on the stock market. However, in a balanced portfolio, there shouldn’t be only one end-all-be-all goal. Instead, being thoughtful about what you buy and sell and when will pay off in the long-run.
4. Not having patience to let investments sit.
While you can be an active or a passive investor as a matter of style and strategy, having patience tends to grow your money steadily and consistently. Active investing is buying and selling assets with the intention of making profits that outperform a benchmark or index. It does, however, carry greater risk, higher fees, and minimum thresholds. While you won’t see the quick returns you might with active investing, a passive strategy tends to have lower costs and deliver greater long-term results.
5. Being “Too Much” of anything.
Diversifying your portfolio spreads your investments across different assts, reducing volatility over time. It can also help to preserve assets, particularly for investors nearing retirement and generate returns even if one investment does poorly. When investing, constantly consider your entire portfolio, rather than putting all your eggs in one basket.