3 Keys to Successful Investing

3 Keys to Successful Investing

You hear investing advice about how to time the market or make big gains before an inevitable market drop, but that information isn’t usually beneficial to the average long-term investor. You want to do what’s right, but with so much contradictory advice coming at you, you might be making decisions out of fear instead of level-headed thought. 

One way to mitigate this volatility is to focus on investing consistently over time, no matter what highs or lows the market experiences. Listen to this week’s episode of the rich & Regular podcast as we talk about understanding the bull market, and keep reading for ways that consistent investing can help you ignore the noise and stick to your plan. 

Let the market work for you. 

Consistency is the name of the game in the stock market, where small investments made over time usually do better than larger, more sporadic investments. However, when the market starts to dip, it can be tempting to abandon our game plan and undo a lot of the passive gains we’ve achieved.

By investing early and consistently, you give the stock market the best chance to do its work, and make you money. Panicking at every market fluctuation wastes your energy, and worse, if you do sell, you can lose the gains waiting for you at the next upswing. 

Many people in 2008 sold when the market was at its lowest point and then missed out on the gains of one of the longest rebounds in stock market history. Instead of selling based on what the market seems to be doing on a given day, week or month, leave your money where it is for as long as possible so it can grow. 

Work with a financial advisor to help you determine the best plan based on your risk tolerance and use these tips to help you stick to the path, even when trouble seems to be brewing:

Listen to your gut.

Don’t let advice from investing “experts” on the internet or TV overshadow the work and forethought that went into your investment strategy. Consistently investing, month after month, can help you get the greatest returns and let you focus on other interests.

Sometimes you do need to pivot on your strategy, but if that’s the case, be sure that you listen to your instincts and talk with a certified financial professional before making significant changes to your investment accounts.

Ignore the news. 

It can be tempting to check for updates and track every loss or gain obsessively when you’re invested in the stock market. However, when you invest consistently over time, you know that you’re committing the same amount of money each month to your investments. Eventually, that commitment may become so familiar that the inevitable ups and downs of the market don’t make you panic and you just carry on as always. 

By having a monthly contribution already accounted for in your budget, your investments don’t have to be an afterthought, and you can have confidence in your financial plan. You know that you are steadily adding to your investment accounts, giving you peace of mind, no matter what the news is talking about that day. 

Focus on the long term.

We have all heard urban legends about people who make it big in the stock market overnight. Much like daydreaming about winning the lottery, that can be a pleasant thought, but it doesn’t help you further your financial objectives. 

Instead, think about your long-term goals and look for ways to increase your monthly contributions, even by just a little each month. Consistently investing from a young age will ultimately provide more significant gains in the stock market than making one large investment later in life because of the magic of compound interest

We created the following examples to show you the importance of long-term investing using this compound interest calculator.

  • An investor who makes an initial $10,000 investment and then consistently adds $100 each month for 20 years at a moderate 6% interest rate will likely see their investment grow to about $76,214.
  • The same $10,000 initial investment and $100 a month contribution made over 10 years instead (half the amount of time in the market) will only grow to around $33,725. 

In this example, you could potentially make over 50% more in the stock market by just starting to invest 10 years sooner. 

Even if you didn’t start investing in your younger days, there is still time for you to secure your financial future. Consult a certified financial planner to help you strategically make up some ground in the way that best fits your life.  

Remember that the highs and lows of the stock market are natural, and by focusing more on the long-term strategy rather than the short-term noise, you can give yourself some peace of mind. Stay consistent in your investing approach and look for small ways to increase the monthly amount you invest so you can set yourself up for success.

Articles

Julien and Kiersten Saunders, Money Editors for SUCCESS magazine, are the couple behind the award-winning blog and forthcoming book, rich & REGULAR. They are producers and hosts of the original series, Money on the Table, which blends their passion for food with thoughtful conversations about money

Articles

Julien and Kiersten Saunders, Money Editors for SUCCESS magazine, are the couple behind the award-winning blog and forthcoming book, rich & REGULAR. They are producers and hosts of the original series, Money on the Table, which blends their passion for food with thoughtful conversations about money

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