Investing is a learned skill. No one is born with the knowledge of how to invest, or how to properly handle money. Without proper learned financial skills poor spending and investing habits take over leading to a life of perpetual working and little excess money for enjoyment.
When your car needs service do you handle the service or do you take it to a mechanic? If your home needs electrical work do you handle it or do you call an electrician? Most of us would answer that we take our cars to a mechanic and would also call an electrician. Even if we are capable of handling the car service or electrical work we often to don’t have the time to properly commit to getting it done.
Proper investing is much like the mechanic and electrician examples above. It is incredibly easy today to open an investment account and make investments on our own. Yet, like the car and electrical examples good investing takes time and commitment. If you commit the time and research you can be successful. Like anything else the amount of work put in can be directly relevant to the rewards.
Investing can be extremely frustrating. It can create anxiety and frustration. What to do with a big winner? Should I sell or buy more when the stock is down from where I bought it? Is the stock too expensive to buy? These and many more questions are why many investors choose to use a professional.
The investment business attracts some of the smartest and wisest people in the world, since investment work challenges people’s minds and emotions against themselves. Successful investing involves stepping into the battling your own personal emotions of greed and fear to move forward.
Understanding yourself and your strengths and limitations when it comes to money can take a lifetime. Ten thousand hours or five years of time within the investing arena is infancy especially when it comes to taking what may seem to be big risks with your hard earned money.
Human emotions and biases such as greed, overconfidence, avoidance, restraint, loss aversion, framing, attention, and fear are strong opponents when it comes to finances and investing. In fact, there are over an estimated one hundred and seventeen human biases that people have to contend with when making choices for improved investment returns. Humans aren’t built for dealing with finances and investing emotionally.
Human behavior is generally irrational, and irrational behavior and money are a poor combination. One of the best ways to reduce poor behavior is through education or to have a team. A team could be an investment club, friends with common goals, or a financial advisor. In fact, statistical research has shown that having an advisor on your team can improve investment returns.
Make Your Money Work for You
It’s your money, and you worked hard for it. Learn to make good decisions and it will improve your investment returns and make your money work for you rather than you having to work for your money.
