“You can achieve anything if you stop trying to do everything”
— Oliver Emberton (writer, pianist, programmer, artist)
I came across this quote the other day, and it made me stop and think how real it is in so many areas of our lives.
To reach some of the most prominent goals, you need to be intentional. You need to be focused. And you need to be consistent in your approach. Otherwise, you run the risk of becoming scatterbrained, distracted and spread way too thin.
The reality is despite what we want to hear, success takes hard work. And to add to that, it’s often incremental, not some big splash that happens overnight. It’s often the result of many consistent small wins and resiliency of pushing through obstacles that challenge us.
And truth be told, quite often it’s not all roses along the way!
We all face challenges, often right before a breakthrough
One thing that I have started is this blog. It was something that I have wanted to so for a while, and if I can be honest, it has been a slower than expected start.
I wasn’t naïve to think that I would have thousands of views a day, but I expected more traction then I was getting in the early days. It has taken patience to see the number of views rise and to get some momentum going. After six months, I am now getting some results.
All of this is to say that had I thrown in the towel after a week or month, I would never have seen the fruits of my labor. Had I walked away from this blog in the early days, I would be missing out on all of the small wins that have happened!
The same goes for a lot of things… not just blogging.
A popular one is weight loss. If you give up after one week just because you didn’t lose weight, then you would never reach your goal.
Or how about starting a new job where you don’t quite know all the ropes after just a week? You would never think of quitting because of that. You would push through and give yourself time to grow and mature.
We take this approach on a lot of things. We invest time and focus in our jobs, our relationships, our children, our health… but for some reason, we treat money very differently.
Why is it when it comes to money and investing we get so impatient?
Instead of being intentional, focused and consistent in our savings and investing, we want it now! Yesterday was too late, and we all wish we could be financially further ahead immediately.
The reality though, is money management is no different than anything else. If we all gave up on something just because it was hard or we didn’t see immediate results, then we would not be living up to our full potential.
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You can be a better investor if you take a similar approach
The same principles of focus, patience, and consistency can help you be a better investor. Losing sight of these things can cost you a lot of money.
Let me start with an all too familiar investing example…
Listening to the media is helpful to stay informed, but it has its limitations. If you leave your investment decisions to the media, every month, you’ll have a new “great idea.”
Today its bonds, and tomorrow it could be real estate. Last week it was important to buy American, and now you need to buy International. And my personal favorite… it’s time to sell everything because it’s all doom and gloom!
It’s no wonder investing can seem SO complicated!
If you’re changing your investment ideas every month (or I’d even argue every year), you’re likely falling short of your full potential. Your constant need for action can result in overtrading and buying or selling at inopportune times.
Instead, being a focused and consistent investor allows you to take part in long-term gains, avoid a lot of fees and build confidence.
Consistency lets you realize long-term gains
It’s a fact that stocks move up and down daily. Some days you’re up, and some days you’re down.
If you’re a long-term investor though, daily changes shouldn’t bother you. Remember, you’re more interested in long-term appreciation than the regular stock price.
You’re not gambling with your money here, hoping to strike rich overnight… investing means, you’re in it for the long haul.
All too often though, investors never see their plan through. When they don’t see returns as fast as expected, they’re tempted by the next shiny object.
Now don’t get me wrong, there are times when you should get out and sell – for example, bad leadership in the company, a change in business strategy, etc. My point though is that if you’ve done your research, you should feel comfortable riding out temporary waves. Many people pull chute too early and bounce around from idea to idea. And there’s MANY problems tied to that.
Flip-flopping between investment ideas can cause you to miss out on some of the best runs that stocks have. Instead of benefiting from steady increases, you often end up buying and selling at about the worst possible times. I call this “catching the dips.”
Let me show you with this example where you have a choice to own stock over the long-term, or flip-flop between investing ideas…
Below is a stock chart showing the returns for Coke and Royal Bank between 2012 and 2015 (I know it’s dated, but it’ll prove my point)
If you held onto either stock during this time, you would have made some money. That’s good news! But what if I layered on some fictional situations that might cause you to flip-flop between investing ideas… Let’s take a look…
The above illustration highlights my point.
Sometimes we second-guess ourselves or give in to pressure from mainstream media. In either case, we can get distracted, and lose a sense of why we invested in the first place.
In the above example, you can see here that if the investor held the stock for the full two years, they could profit some money. Yes, they might make more owning Royal Bank here, but at least they’re turning a profit in either case.
Now if they buy and sell throughout the two-year period, there is a genuine chance they lose money.
Is it going to happen? Probably not like I presented here, but there is a very good chance they might. It’s challenging to time the market. Even the pros have a tough time!
Forbes magazine covered this in an article not too long ago. Dalbar, a financial market research firm, examined returns investors received relative to the market. They find over the past 20 years, investors in stocks have lagged benchmarks for the market by an average of 5% per year, on average. Part of this was due to poor timing decisions according to their research.
While it’s easy to look back at a stock chart and assume when you would theoretically buy and sell, your actual behavior may be quite a bit different because of your emotions… namely fear and greed.
Instead of trying to make a quick buck, I’d recommend you follow Warren Buffett’s advice:
“Our favorite holding period is forever.” Warren Buffett
Related post: The best way to invest is to think differently
Consistency in your investment ideas has its benefits
Now that we’ve talked about all the risks, it’s time to shift to all the benefits of being a consistent investor! Overall, two big ones come to mind…
It helps you avoid excessive trading costs
When you change investment ideas often, you run the risk of incurring a lot of costs! Every time you buy or sell, it can cost you. That’s hard earned money right out of your pocket.
Fees, in general, aren’t a bad thing, but you should always make sure you’re getting adequate value for what it costs you. If you end up paying hundreds of dollars a year in extra trading commissions, you better make sure you’re buying into the right deals!
Consistency helps reinforce confidence
You know what helps ensure you stick with something? Positive reinforcement.
As you stay focused and consistent with your investing idea, you’ll slowly see the value of your portfolio increase. As you earn more, your confidence as an investor grows with it.
Now, what happens if the value of your investments goes the other way? What if you end up “catching the dips” that I mentioned earlier?
Well for starters, you can get frustrated. You might always feel like you’re missing out, and if you look back, you would have been better off holding your investment for the long-haul.
If this repeats itself over and over again, it’s only a matter of time until you give up!
Summary and Action Steps
The investing world can be scary if your new at it or if you’re expecting to make a lot of money in a short amount of time. When you’re investing in stocks, resist the urge to jump on the latest trend.
Instead of trusting research many of us are prone to jump on board the next idea – either out of fear or out of greed. On top of that, a lot of us (me included) feel better when we take action. It makes us feel like we’ve done something to control our situation.
Reality check: Sometimes the best action you can take is no action at all.
Be sure that you do your research before you make any investment decision on both sides – to buy or to sell. And if you have serious investing FOMO, keep it in check by creating “limits” when you buy your investment on when it’s time to sell. This helps keep your emotions in check.
And last but not least, if this isn’t your area of expertise, please speak to a professional. There are lots of great people out there to help point you in the right direction and provide you some good investing advice!
The reality is, we would all be better investors if we applied a little more consistency and focus.
Do your research, plan it out ahead of time, and stick to your guns! Celebrate the small wins along the way, and in no time you’ll reap the benefits.
Think it through
- On a scale of 1-10, how “active” of an investor are you? Why?
- What’s the driving reason for wanting (or not wanting) to buy/sell often?
- What are some ways that could help you be a more focused and consistent investor?
- Don’t be a distracted investor – learn how to drown out investing noise
- The best way to invest is to think differently
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