What’s stopping you from being a world-class investor?

What'a stopping you from being a world class investor?

The Number 1 reason why people don’t invest successfully is not so much that they invest and fail, but rather that they fail to invest.

It’s the rare horror stories of people betting their houses and losing everything, or being defrauded by conmen that make for the most read newspaper articles. But the reality is that, for every one of those, there are thousands of real-life people who fail to plan their finances and invest adequately.

So let’s have a look at why you might be failing to invest, and what you can do about it.

Why you fail to invest

  1. You feel it’s just for those ‘in the know’:
    If you aren’t investing because you feel you ‘just don’t know enough’, I have two pieces of good news for you:
    First, it isn’t rocket science. If you know basic arithmetic and have common sense, you can learn to invest.
    Second, the fact that you are aware of your limitations is good! The worst investing mistakes are caused by over-confidence, so knowing what you know and what you don’t know is a great start!
    To get you started, we discuss some of the most important investing principles in our past article on how to set up a monthly investment plan and how to choose the best lump sum investment. Mind you, we’re not talking about buying and selling exotic securities with funny acronyms. Let’s get this clear – that’s called trading – not investing, and even within banks and funds it’s a specialised task that does require expertise. We’re talking about investing your personal funds for the long term. No pin-stripe suits or Economics PhDs required.
  2. You’ve had a bad experience.
    So you did what you shouldn’t have – you followed that advice from someone at work just because everybody else seemed in on it and you didn’t want to miss out. Or you trusted someone and they let you down. Or maybe you just wanted to succeed really hard and went out on a limb and things didn’t go well.
    It’s understandable that you are wary, having been burned before. But as we discuss extensively here, in the current market, leaving your funds in safe but low-yielding accounts is a sure recipe to lose money to inflation over time. Nowadays, investing is not really a choice like it once was – it’s a necessity if you want to grow your assets at all. So by not investing you aren’t making up for a previous loss – you are adding to it. It can be hard, and it can be scary, but if it’s fear that is keeping you back, you must get over it.
  3. It’s dangerous.
    Yes, there is risk to investment. But as mentioned before, in the current environment, there isn’t really any way to maintain and grow your assets without taking on risk – so by avoiding risk, you are locking in an almost certain loss. Isn’t risk better than a certain loss?
    Furthermore, risk varies according to each kind of investment, and is more intense in the short-term than it is in the long-term – prices swing around day-to-day, but year to year they tend to converge to fair values. So it’s entirely possible to put together a portfolio that can both earn an interesting return and have a balanced amount of risk.
  4. You can’t be bothered, or you’ll do it tomorrow.
    We hate to admit it, but we all procrastinate sometimes. Apart from the first push to do something, which really is a matter of willpower and urgency, the solution to this in the long-term is to set up systems which keep you in-line. Like monthly investment plans. So investing, rather than leaving your cash in a bank account, becomes the default option, and doesn’t depend on your getting round to it every time.
  5. You don’t have time
    Life is incredibly busy nowadays… but also filled with seemingly-urgent but ultimately unimportant tasks. First, ask yourself whether you are prioritising correctly – how far down the list should taking care of your net worth be vs. all these other tasks? And if you do conclude that you have more important things – maybe you have an extremely demanding job, or are going through a challenging family situation – fair enough. But in that case, rather than let your assets waste away, hire someone to do it for you.

Talk to a financial advisor

A financial advisor can assist you with each one of the issues above. If you feel you lack the expertise, they can provide it on your behalf, and also explain investment concepts that you may have difficulty with, and recommend reading so that you learn and gain confidence over time. If your concern is risk, they can help you minimise it and provide an outside opinion of what’s acceptable and what’s just foolhardy. If you don’t have time or tend to procrastinate, they can do the heavy lifting on your behalf and also nudge you to act when it’s really important. We talk about choosing the right advisor for you here and here.


CHRIS LAND, FINANCIAL ADVISOR

Chris has 9 years’ experience as a UK pension specialist and licensed financial advisor. He specialises in helping clients make balanced financial decisions to grow their personal wealth.

Chris is licensed with Globaleye, an award-winning international financial advisory firm established in 1999, with 10 offices and 15,000 clients worldwide.


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