For a first-time investor, throwing your hat into the ring seems like the scariest and most difficult thing you could ever do.
But according to Morningstar’s personal finance director Christine Benz, investing should be a simple process, and the simpler it is, the higher the chances that your investments will be fruitful.
The director recently went over American investment decisions, overhauling at least five investment portfolios from average citizens daily.
For this venture, age was not a disqualifying factor, with Benz working with individuals from multiple generations, including millennials trying to buy homes and baby boomers preparing to hang up their boots and retire.
As she puts it, her two greatest findings are pieces of investor wisdom that apply to all potential investors, regardless of their age.
Keep It Simple
Her first takeaway has already been mentioned, this being that investments should always be kept simple. The other one is that an investor should never discount any other aspects that make up the entirety of their financial plan.
Speaking to Business Insider, Benz revealed that the one thing the noticed in almost all investment portfolios was just how complicated they were. Soon as the went through them, she would come up with millions of ideas on how simpler she could make them.
According to her, investors should try to streamline their investments as much as possible. This, she says, applies to any and all types of investors, no matter the field they’re pouring their money into.
With a less complicated portfolio, Benz argues that said investments won’t require as much oversight, and yet the gains will be significantly higher.
As she puts it, your investment portfolio should be simple enough to require just one annual checkup, leaving you to handle other things without being worried that your money is going up in flames.
Think Outside the Box
As you may have picked up thus far, Benz’s school of thought is that your investments are all about the specifics in your portfolio. To be a successful investor, she says, you need to look and think outside the box.
Obviously, this is where your larger financial plan comes in. It doesn’t seem smart to invest without checking in on exactly how such a move affects your finances, does it? Yet millions of Americans do so anyway.
Yes, investing may help you accumulate wealth. However, the question Benz is trying to put across is, “Of what good is your accumulated wealth if you have misguided financial policies?” Truth be told, you may end up squandering your assets thanks to poor financial habits.
Think about this for a second – you have as enviable an investment portfolio as any could be, but you did not save for retirement.
Or, if you did, you under-saved. What happens then? Your whole world starts caving in, and unfortunately, you will have no one to blame but yourself.
There’s also another way to look at it, and this time, it is all about your spending. Say you have that simple portfolio that would please Benz. Your investment decisions are top-notch, but you are living beyond your means. Will the profits your investments bring you help at all? Exactly.