It’s the 18th hole. This pro-golfer has nailed this putt a thousand times. But then a noise from the crowd rattles him, and he starts to 2nd guess himself.
He’s got a case of ‘the yips’ (also referred to in the sporting world as ‘mental static’.)
He overshoots. The ball rolls past the hole and across the green. The crowd sighs.
I think about “the yips” as it relates to investing all the time.
Most investors are aware of market cycles, but many still fall into the trap of making investment decisions based on outside influences and emotions.
They set out with a plan with their eye on the long-term prize – financial freedom – to do what they want, when they want, free from financial stress.
But then they get nervous—the news, media money experts, and well-meaning mates panicking about investment markets tanking.
They start to overthink their investments.
Despite working hard to build their investment portfolio, they let fear and uncertainty creep in, causing them to overthink and make impulsive decisions.
They might pull out of the market entirely or act on a ‘hot’ investment tip from their brother-in-law.
It doesn’t help that financial media is obsessed with “miracle” investments – the elusive “hole in ones” of the financial world.
It’s hard not to get distracted and sidetracked by all the noise. But you may overshoot and derail your long plans by getting tricky and trying to “time” the market.
But, with a solid financial foundation in place, an investment strategy that considers your goals and timeframes and some handy hacks, you can conquer the investing yips and reap the rewards in the long term.
Investing hacks to beat the yips
- MASTER YOUR EMOTIONS.
By understanding the psychology of investing, you can avoid the trap of reacting to short-term market movements.
- BLOCK OUT THE NOISE.
We know it’s hard to do, but we recommend you ignore the media hysteria and tune out the short-term static. And avoid checking your investment apps and balances too regularly.
- IT’S INVESTING. NOT SPECULATING.
Investing should be boring; it’s not about the frequent dopamine hits. Investing starts with knowing:
- What you want to achieve (your goals).
- How much is enough money to reach those goals.
- The timeframe to achieve your goals.
- Your ‘sleep-at-night’ factor (how much risk are you willing to accept).
Once you are clear on the above, you can invest in assets that suit your situation, with a focus on the long term.
- PUT YOUR EGGS IN DIFFERENT BASKETS.
Diversifying across different asset classes is a crucial rule of investing. Generally speaking, growth assets like property and shares are higher risk and higher reward investments. Defensive assets like cash and fixed interest are lower-risk, lower-reward investments.
- TAKE ADVANTAGE OF TIME.
The sooner you get started investing, the longer you have for the power of compounding to work its magic.
- TIME IN THE MARKET IS MORE IMPORTANT THAN TIMING THE MARKET
Market timing or picking the right shares at the time is almost impossible, even for the experts trading on Wall Street.
- DOLLAR-COST AVERAGING
With dollar-cost averaging, you make regular incremental investments over a period of time. It’s a simple tool to take the emotion out of investing so you can ignore short-term market volatility.
- KNOW YOUR ENEMIES.
Inflation, tax and fees are sneaky enemies for investors. Investing in growth assets with returns that outpace the rate of inflation is one of the best ways investors can beat inflation. Always speak to an accountant before making investment decisions. And know the fees you are paying for your investments and calculate the impact those fees will have on your investments over the long term.
I cover these hacks in more detail in our Investment Playbook – you can download it here.
I will leave you with one of my favourite investment quotes by Peter Thornhill. It wraps up investing perfectly:
“THE TRICK IS TO OWN THE RIGHT ASSETS – ASSETS THAT GENERATE INCOME, THAT WILL GROW AND MAINTAIN THEIR VALUE OVER THE LONG TERM AND ENABLE US TO PURSUE THE REST OF OUR LIVES WITH AS MUCH PASSION AND PLEASURE AS WE CAN MUSTER.”
Download the Investment Playbook
Download the Investment Playbook
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