8 Investment Habits to become better Investors: Things professional investors don’t want you to know

8 Habits to become an Investor

Things Professional Investors don’t want you to know

By Parth Agarwal

Many people say- “ The XYZ stock I have purchased is going to boom and soon I will be a millionaire. ” (Warning: Don’t trust such people because 99% are going to land straight on the land flat)

People always try to increase their capital gains when what they want is to improve their quality of life. For example- If you buy that on-road condo on a mortgage, will your lifestyle improve? Although your net worth goes up your lifestyle doesn’t. On the other hand, you will have to work hard to pay the mortgage payment.

Now consider that you put this property on rent. Now, you receive a check of $1000-$1500 every month. Will this extra money not improve your life? For sure, you can buy those extra subscriptions or the spa club membership you always wanted!

These all habits will help achieve financial freedom and become a successful investor yourself.

Tracking Financial Success

It is said, “ To change something you must first be aware of it .” This is what most effective investors do. They are always themselves, “If I stop working today, how much time I am going to survive.”

This is one of the most important questions for investors to make a rule to ask themselves. Why? Oh, man, because you are doing investing so that you can sustain your life without working. It makes me mad to think but most investors never consider this. Now let’s see what’s your wealth number,

So, the formula is Cash on Hand/ Monthly expenses gives you the wealth number.

Cash on hand is obviously cash and anything which you can convert into cash, now. For example- Your savings, Your funding, etc.

The number tells you how many months you are going to survive if you stop working today. Get into the habit of calculating your wealth number once every two months.

By the way, my wealth number is 0.2083333333. It’s embarrassing to share this here but it’s okay. The role of this habit is to make you aware of where you stand financially so that you can create better financial plans for yourself.

“Successful investing is about managing risk, not avoiding it.”

– Benjamin Graham

Habits to become to an Investor

1. Start with a plan

As the famous saying goes, “Planning to fail is failing to plan”. Generally, I don’t trust old people but they are right in this thing. If you don’t have a plan, it shows that you are not serious about your financial future.

How do I create a plan? A good question. A financial plan just includes answers to some questions. Any kind of thesis is strictly prohibited.

Question 1: Why do you want to invest? Why do you want to be financially free?
Question 2: Where do you stand now? What are some measures you will use to track yourself?
Question 3: What type of investments plans you are going to use? What are the investments that suit you well?

You can make it on your binder or a simple diary.

 

2. Learn to evaluate risk and reward

All good investors have a habit of evaluating risk and reward before making any investment. If you don’t do this then soon you can get into big trouble. Whenever you are going to make an investment decision, wait for a moment and take a deep breath and evaluate the risks and rewards of that investment.

Always remember that the risk involved is inversely proportional to your financial education. For example- If are a beginner in the stock market and are going to invest 1 lakh rupees or $1000 then the risk in comparison to reward is much high and you should not make the investment. On the other hand, If you are in the stock market for more than 10 yrs and know what are you doing then the reward in comparison to the risk is much higher and you should definitely make the investment.

 

3. Take Calculated risks

You said, “If something on evaluating is riskier then we should not do it but investing in itself is risky”. Nice point, fella. Let me take things further. I am asking you to first evaluate the risk and reward. If the risk is much more than the reward then reposition yourself so that reward is much more than risk. In most cases, you will be able to reposition yourself.

Taking the previous example forward, assume you are a beginner and in your evaluation, you found investing 1 lakh is risky. How do you reposition yourself? It’s simple. Take a course worth Rs 5000 or much less than start paper trading. Paper trading is investing in the stock market but with paper or fake money. Make mistakes and learn from them. When you get comfortable then you can start investing in the real stock market.

It’s important to make mistakes but with calculation. You cannot say, “I made a mistake by killing a person and I learn that I should not kill a man.” Therefore take calculated risks and small mistakes constantly

The thumb rule is to take to the risk but minimize the damage.

 

4. Taking help from professionals

Good investors never believe in doing everything themselves. They have adopted the habit of constantly hiring and listening to their advisor. As a business, investing is also a team sport.

Many people will never want to consult a tax strategist before buying real estate or any other investment. This is one of the many examples. The common myth is it will be expensive. Actually, it will be expensive in short term but in long term, it will benefit you immensely.

Let’s say you are a real estate investor then you will need,

  • Real Estate Lenders
  • Real Estate Brokers
  • Real Estate Attorney
  • Bookkeeper
  • Real estate Accountant
  • Tax Accountant
  • Insurance Agent
  • Property Manager

I am starting out do I need all of them to start? No, it depends. If you are starting you don’t need all of them but having a real estate lender and broker is a must. You can do the bookkeeping part yourself but many times you will need the help of your accountant.

The drill is to get all the professionals as soon as possible in your team.

 

5. Invest in Financial Literacy

What is Financial Literacy? It’s a very simple term. It refers to the study of money and understanding how money works.

The basics of financial literacy include- Types of income, Taxes, cash flow, assets and liabilities, taxes, and much more. In school, we have been taught Mathematics, Science, History and I don’t know what else, most of which we are never going to use in our real life. And, what about one of the most important topics for a human? Money. It was never taught.

Professional habits not only have a habit of increasing their financial literacy but also follow it as a strict rule. They know its importance and you should also if you want to be rich and financially free.

 

6. Reading books

You would have heard the phrase- “Readers are leaders.” The same goes for investing. Professional and savvy investors make a note to read a good amount of investment books every year.

Don’t believe me! One of the world’s biggest investors, Warren Buffet says, “Most of my time in my office, I sit and read.” He also estimates 80% of his time is spent studying and reading.

When one of the most sophisticated investors, Warren Buffet reads so much then don’t you think you also should read more.

12 Best Books on Investing to read

 

7. Finding mentors and coaches

I read a good amount of books. Do I still need mentors and coaches? Yes, definitely. Books are a great way to acquire knowledge because you can get somebody’s whole life experience in merely some hours. Therefore the knowledge provides is great but sometimes you need a more personalized approach. This is where mentors and coaches come into play.

Successful investors don’t have mentors and coaches but coaches and mentors make successful investors. Therefore successful investors are always in the search of mentors and coaches to make them more successful.

How to begun? I can understand for a starting investor it can be tough to hire mentors and coaches. Initially, in spite of going to high ticket mentoring programs, you can join online courses. It’s a high chance if you have joined a good course then they have a Facebook group or membership community. Although personal mentor-ship programs are better, these Facebook groups and membership communities are also really great for starting out.

 

8. Financial Statements

All successful investors are always in a habit of keeping their financials in place. This includes keeping your books up to date and regular meetings with their advisors like accountants, CPA (or CA), tax consultants.

Why to do take such hassles? I also would prefer to play basketball than to visit my accountant if it was not necessary. First of all, it keeps you give clarity. It produces the same effect when you take out your wealth no. i.e you get to know where do you stand.

You also get to know are you achieving your goals or not. If you cannot hire mentors, you can make your advisors your mentors. You can ask things which come under their expertise and if you have paid them well they will be happy to help you.

 

Bonus tip:

You must start playing the Cash flow board game. This game is created by Robert Kiyosaki,the best-selling author of Rich Dad Poor Dad. NO, I neither have a stake in his company nor I am an affiliate of this game. I recommend you this game because it is one of the best things out there to learn the fundamentals of investing and producing cash flow.

Conclusion

In end, we have laid down the theory but following the theory is up to you. Installing any habit is always harder but it’s always worth it. Don’t try to install all the habits of a successful investor at once. First, take the habit you like most and stick to it for a month. If you feel after a month that this habit is completely installed then move to the next habit and then repeat the process.

Don’t forget to tell me which habit you are going to install first. Hope you become a successful investor soon!

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