Do you know where you invest your money and how you do it? You may be a good investor right now, but wondering what your portfolio would be like if you were better? If you want to take your financial performance and investment to the next level, we offer you five tips to help you become a better trader than you are today.
1. Connect Your Investments to a Goal
While some strategies are better than others, there is no universal "best investment". The best investment strategy for your situation means that you evaluate your investments according to your goals. Start by asking yourself why you're investing and what you hope to achieve. The answer will give you information on how to invest and will help you if you are interested in becoming a better investor.
Your goals; It determines your portfolio distribution, your broader time horizon and your tolerance to risks. Therefore, being sure of what you want to achieve allows you to understand the critical factors that determine where and how to invest.
2.Reevaluate Your Plan and Goals Periodically
As is known, everything changes, goals change. And when things change, you may need to update your investment strategy as well. For this reason, you should take the time to review your investment plan every year, if not monthly, and make sure that your investments are still in line with your goals. Each year, evaluate your strategy and ask yourself questions like the following questions:
When do I want to use this invested money?
Have my thoughts about risk and risk taking changed?
Do I know which companies I invest in?
What do I need to know better?
While it is important to answer these questions correctly, it does not mean that you need to review your investments or make changes. Sometimes the best thing to do is to do nothing.
3.Understanding the Difference Between Risk Tolerance and Risk Capacity
Your risk tolerance determines the amount of volatility (volatility) you can manage in your investments. With a high risk tolerance, you agree to see large fluctuations in your portfolio. If you have a low risk tolerance, you know you don't want to deal with large volatility and high volatility so you invest accordingly.
However, your risk tolerance is not the same as your risk capacity. While risk tolerance is subjective, risk capacity is objective. Your risk capacity is actually determined by how much risk you can take with your investments and how much you need to meet these goals.
Being a better investor means knowing that even if you are in a position to take great risks, you can only take risks to the extent that your goals set.
4. Diversifying Your Portfolios and Accounts
You already know the importance of portfolio allocation and diversity in your investment. However, do you diversify the accounts in which your portfolio is included?
Investing in individual retirement plans is good to start with. However, these calculations somewhat limit your flexibility to use your savings when the tough moments come. Because you can only use this savings and state contribution in your retirement without paying any withdrawal penalties, you may think about what else you can invest in to grow your savings at other important stages of your life, before or outside of your retirement.
So again, you should consider what your goals are. Then, make sure you diversify your accounts correctly so that you can access the money you need in addition to this targeting.
5. Eliminate "Human Mistakes"
Most average investors are outperforming the stock market or the SP500. Why is that? Because the SP500 or DAX30 is just following the market. It doesn't decide what to do, it just does. Average investors tend to make "mistakes of humanity" driven by emotion. If you want to be a better investor, you need to eliminate the things that cause you to make emotional and illogical decisions. A few ways to do this:
1. Set an investment strategy and plan it based on your goals.
2. Automate as much as possible from your contributions to rebalancing.
3. Work with an assistant, such as an investor coach, to help you stick to your investment strategy.
To Be A Better Investor Means To Be Aware Of Yourself
Good investors know how to set up a plan and stick to it. Often they have a plan that they can implement on their own. But the best investors are; They are also aware of when it can be helpful to have a trusted advisor to get advice and see their blind spots. Usually, things we don't know we don't know but things we don't know we don't know mislead us.
Using these tips can help you become a better trader, but the last point on how to eliminate mistakes is one of the most important issues to consider.
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