MANILA, Philippines – In the book 7 Habits of Highly Effective People, Stephen Covey said that habits are “the intersection of knowledge, skill, and desire.” Say you want to be a millionaire in the next 5 years. Having a great business idea is not enough. You need to have a game plan. And it all starts with proper saving and investing practices.
Investors become big not only through brilliant buying maneuvers or because of a sizeable nest egg. They also have good habits that are deeply ingrained into their system. “Very seldom do you see a one-time bet that pans out for you like magic. Investing is a lot of hard work,” said Moi Esguerra, Head of Portfolio Management at Sun Life Financial, Philippines.
For his job, Esguerra deals with a lot of first-time and veteran investors on a daily basis. We asked him: what habits set successful investors apart? Here is a list.
They do their homework (and never stop learning)
Begin with the habit of seeking knowledge. “If you know nothing, then start arming yourself with knowing at least something,” Esguerra advised.
Think of it as your first line of defense against investment scams – a prevalent reason for losing hard-earned funds. “If you know the basics, like how interest rates work, you’ll know that something which promises to double your money in two or three months is too good to be true,” Esguerra said.
How do you build the studying habit? Make it a point to read not just about trading principles, but also which companies are worth investing in. “You can go to Wikipedia, Investopedia, and all those other sites,” Esguerra said. “So there’s no excuse to say ‘you know nothing,’ because of the wealth of information available.”
They save regularly – even if it takes force
Successful investors are religious in setting aside a portion of their income every month. They prioritize building an emergency fund (usually in the form of bank savings). Then, the rest of their savings goes to investments. They aren’t afraid to take some investing risks because they’ve got backup.
Building a savings habit is hard, but the best investors find ways to force themselves into saving. They enroll in services like payroll deductions and scheduled online transfers. It’s easier to let the money go when it never shows up in your spending account.
Their dreams come with action
It’s easy to sit down and create a bucket list. But according to Esguerra, successful investors take it a step further by creating an actual strategy for their goals. Their goals are specific (ex. “P50 Million” vs. “Be rich when I retire”), have a schedule (“Earn that amount by 55”), and come with a definite plan (“Invest in equities and bonds”).
They do not stick to one strategy forever. Every year, they review their plan and check if it still works. Then they revise accordingly. But they never lose their eyes on the prize!
Esguerra’s advice is to practice by creating strategies for small, short-term goals first. “For example, you want a phone. You work for it and save up for it. Then move on to something bigger,” he said.
Yes, investors should always monitor their money. But they should veer away from being too vigilant. “You should keep track of how much you invest. But avoid looking at it every day because the prices fluctuate daily,” Esguerra said.
Investments grow over time, not overnight. Seeing big dips might cause unnecessary alarm – it might even lead to selling prematurely, which is a mistake that new investors often make.
Successful investors do check their portfolio regularly – but do so with patience and the understanding that big earnings manifest in years, not months. “It’s a matter of horizon. If you have a long-term outlook, then the blips that you see in the market should not affect you,” Esguerra said.
They know when to say “no” and when to say “yes”
“For Pinoys, it’s very hard to say ‘no,’ especially if it’s a relative or a good friend selling you this or that,” Esguerra observed. For example, an aunt would say, “I’m earning through this pyramid system,” or a kumpare would say, “I’m starting a new business, I guarantee that it will triple your money!” In our culture, outright refusal can be seen as offensive.
“More often than not, the general reaction is ‘Sige, pagbigyan natin ngayon’ (OK, let’s give in this one time),” Esguerra said. “But actually, the correct thing to say should be, ‘please give me time to think about it.’”
Successful investors know how to refuse a venture when it is not aligned with their goals. The risk of offending one person is better than the risk of not being able to provide for your loved ones’ future. Meanwhile, they should also know how to assess and spot a good opportunity when it comes.
Awareness is just the first step to mastering these habits, but practice makes perfect. What other habits would you recommend? Let us know. – Rappler.com
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