4 Lessons on how to become a good investor

6/19/2017

My investing experiences are coloured by dramatic events that rocked the financial world. I remember when Russia defaulted on its debt and the 2008 financial crisis.

I vividly remember the panic, confusion and unimaginable events as they followed one another.

It was these events, that gave me the courage to jump into the investing world. I realised I can't change what is happening around me but I can definitely change my personal financial situation for the better. And the only way is to take control of it.

My initial plan was simply to get out of debt and rebuild my savings for retirement. I then decided to go in deeper when I heard about investing money in shares through Satrix. I saw women like me making money by investing in shares and their success pointed me in that direction.

And so I jumped in.

I'm nowhere I want to be financially but these past 12 years have totally transformed my financial mindset and life.

Although there are many, many new ideas that may appeal to you, (nowadays people are in heavily invested in Forex trading.), history has shown that investing in companies is one of the easiest and most profitable ways to build wealth over the long-term.

In this post, I wanted to share my experience with you, in the hope that you will avoid some of the costly errors that I made in my investing journey.

4 Lessons to become a good investor 

1. Let's be honest the language associated with money and finances seems complex to the point of intimidation. Some of the words used are derivatives, mutual funds, bonds, stocks, hedge funds, etc. To many inexperienced women in the field of personal finance, this language is very unfriendly. Fortunately, I worked with people who knew a lot about the language and could break it down. To be honest, sometimes they put me to sleep and other times they inspired me to want to learn more. The best teacher was the internet. I found the language simplified and the message interesting enough to want to do something about my finances.

Lesson: The best thing to do for yourself is to educate yourself about money management and investing. While it’s true that expanding your understanding of finance can take years of effort, getting the basics under control is easier than you might think. All you are required to do is just START. Read a book. Read an article. And soon you will have a better understanding of the language used.

2When I started investing, lots of people were making money. I also wanted the piece of this pie. But this was a bad idea because I didn't know a great deal about the investment world. I got carried away by friends' great tips and "hot stocks." As much as I made money, even from untrustworthy investments, I also lost a lot of money, more money than I gained.

Lesson.  Remember when you were a child and always asking when you will get independent, when you will make money and when you will be involved in discussions adults took part in? Well, life didn't grow you that quickly and along the way, it offered you lessons to assist you to be a better adult. Investing is the same. It's a process and it needs time. So don’t rush into it. Investing is not a journey towards building an X amount of money, but a journey to attain financial independence. That is why it's essential for you to first invest in your own knowledge and to understand how it works. Commit to learning first and you'll get better at investing.

3. I've always been a cautious buyer, but the problem is that once I've made up my mind, I just dive into it. I just forget everything. All I see is what I want. This problem stemmed from my childhood, where money was tight and I learned to be a bit of a hoarder. That's why I had to learn to be a mindful spender. It's that hoarding side of me that gets me in trouble. I do have moments of weakness, but now I can control them. This has also helped me to understand the type of investor I am.

Lesson:  Studies by Journal of Decision making titled Men Buy Women Shop show that as women we tend to be more astute consumers than men, simply because we are inclined to invest the time and energy vital to research and compare products. What I would encourage you to do is to consider your shopping habits and spending patterns to understand yourself better as an investor. Remember, successful investor possesses certain qualities and those qualities can be learned.

4.  When I stated out as an investor, I was a lazy investor. I didn't want to take any responsibility for my finances. I loved reading about the latest "hot tips" from the "gurus" and based all my financial decisions on what they were saying or doing. I remember three of the companies that I owned that were highly recommended by friends dropped by 40%. And thanks to fancy stock guru's advice, I've bought into worthless stocks. I never recovered from that loss.

Lesson: In addition to learning about your behaviour and investment styles, it would help for you to thinking like an owner. Seeing yourself as a part-owner of any company would encourage you to become familiar with a business’s products or services. A notable book on this subject is “The Intelligent Investor” by Benjamin Graham. This book shaped the mind of one of the most prominent investors of our time, Warren Buffett.

It is essential to remember investing isn’t easy. It takes work and constructive advice for it to be successful. If you take your time however and remember to do your research and invest wisely, you’ll be well on your way to becoming a better investor.
Powered by Blogger.