When it comes to investing, the strategy itself is typically quite simple. However, for many people maintaining that strategy proves difficult. Effort is still required to tap into long term opportunities, which most investors fail. An overwhelming 80% of investors fall into the never-ending loop of making mistakes that cost them valuable time, effort, and money. In stark contrast, the top 10 or 20% of investors are able to continuously grow their portfolios over a long period of time.

What enables them to do this?

In this article we outline why most investors fail and explain what successful investors are doing differently.

Why Effort is Not Equal to Success

Emotional bias influences everyone at one point or another. Market hype or economic news can prove very distracting which causes judgment to falter. Decisions made around such guesswork often prioritise excitement and fear over a proper plan.

The fear of missing out (FOMO) is another common pitfall. Buying spikes are triggered at selective points, causing many to jump in well after trends are favorable. Even worse, many hold themselves on the sidelines in anticipation of an ideal situation. Failing to act during ideal situations translates to stunted long term gains.

Common Investment Blunders

Everyone makes mistakes, including seasoned investors. One case was during a $50,000 negotiation miss with a property deal. That pause cost billions of dollars in unrealised returns. Another case is missing out on a convertible note investment during a company’s early stage. That investment opportunity is worth something substantial now, but a combination of inexperience and fear led to it being passed on.

Both cases show that emotion can be poor judgment and lead to not taking action. Such blunders are part and parcel with life; the most important thing is learning from them.

Why Emotional Attachment to Money is a Problem

People have a strong emotional attachment to money. Most times, they tend to associate it with ones freedom, safety, or choices. Such connections would only lead to bad decisions because they are illogical.

A better way to go about it is to shift mindsets and consider money as units, not dollars. This may reduce emotional bias. When planning is incorporated into an investment strategy, it brings order and makes decision making easier.

Why Planning is Important

An investor without a plan is most likely to act with impulse. A plan is a way of making emotions more structural; a clear blueprint where emotions turn to structure and everything is organised. It safeguards you from losing direction when news and other people’s opinions take you off track.

An effective strategy encompasses income, expenses, savings, and investment goals. It also describes the level of risk you are willing to accept. Documenting it transforms it into a tangible object. Even though your goals might adjust in the future, it is helpful to have a starting point that provides clear direction.

Time: The Most Overlooked Advantage

Time spent in the market is better than trying to time the market. In fact, the best outcomes tend to manifest from holding quality assets for a long time. Real estate and shares need to be nurtured for a period of time in order to grow with inflation and market cycles.

Your buying power is reduced by delaying your entry. Prices, dividends, and opportunities become increasingly more expensive. Many are waiting for a market pullback, but they miss the preceding growth.

Optimisation is often achieved with being early instead of perfect.

Risk Management:

The successful investors have risk management policy first. Effective risk management isn’t about avoiding exposure, rather it is about how you control it. Without risk management, even great gains can be lost.

Strategies of good risk management include:

• Having a clear pathway towards exiting the investment.
• Maintaining adequate cash reserves when purchasing property.
• Practical limits for sell orders should be set.
• An emergency fund should be built.
• Borrowing less than the maximum amount a finance company lends.

Investors will always have varying perceptions of risk.

An investors personal comfort level and investment strategies are important while creating an investment plan.

Distinctive Traits of Top Investors

• • Top investors tend to be successful due to a few distinguishing traits.
  • Discipline allows them to focus on the steps they have already outlined and remain undistracted.
  • Education makes sure top investors understand the investments they make.
  • Patience guarantees they do not sell their investment too soon.
  • Focus, helps them ignore peripheral activities and any connected phenomena.
  • Objectively ensures decisions are made with utmost rationality instead of being driven by emotions.
  • They do not procrastinate and make decisions quickly.

Final Thoughts

An outstanding competitive advantage within investing stems from the consistent repetition of simple strategies over an extended period. Planning, protecting their capital, remaining focused, learning from failures and simply not counting on luck, are the differentiating factors among top performers.

If the investment strategies you have adopted feel complicated, go ahead and outline a plan and focus on self education about investments. Starting early is always better in order to secure sufficient time for investment growth.