It is great to be in control over the timing of when you leave the yachting industry as a result of the earlier choices you have made to manage your money. Follow these habits, and you will get the most out of your yachting career and be able to leave financially independent for the next chapter of your life.
The difference between short and long term investing?
When you invest for the short term, you are trying to outperform the market. By making considered decisions from a lot of research and drawing from your own experiences which is often time-consuming, expensive work or you have the choice of paying someone to actively manage your investments which results in a higher fee to do this for you. Whereas, a long term approach is of the stance that if an investment is fundamentally sound and you as an investor are well-diversified, then your returns will grow over time. As a long term investor, you are not focused on the market fluctuations year to year, so it will allow you to adopt a buy and forget approach and to carry on living your life while your money goes to work for you.
8 habits for successful long-term investing
1. Create a budget and financial plan
Focus on what you can control, not what you can't. It is pretty much impossible to predict with consistency where the financial markets are heading, so it is best to avoid trying. Instead, focus on your financial goals, the money you'll need and by when and create a plan on how to get you there.
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2. Start now and invest consistently
Start investing as soon as you can and keep your investing consistent ideally through automatic payment. The longer you wait to think about your future, the fewer choices you will have when you get there. By investing, often and with smaller amounts, you are maximising your time in the market, and the market ups and downs will matter less due to dollar-cost averaging.
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3. Have a long-term view and don't trade
The more investments you make to buy and forget, the better it will work for you. As tempting as it may be, don't focus on the day to day fluctuations of the stock market. Over the last decades, despite the ups and downs, the stock market has been the best place for the creation of wealth for long term investors.
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4. Compounding returns and reinvesting your dividends
By leaving your money invested; you start to earn returns not just on your original investment, but on the returns you made along the way. When you see compounding returns illustrated, it is a powerful strategy in investing. With compounding returns, your investment can begin to grow rather rapidly, i.e. if you earn 8% interest and keep your returns invested it will only take nine years to double your original investment.
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5. Diversification – don't put all your eggs in one basket
You cannot predict returns; however, you can predict and therefore manage risk. Through diversification, it reduces your exposure to the risk of any single one of your investments providing disappointing returns. Even better, when performed correctly, it reduces your risk without decreasing your expected returns.
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6. Passive investing - It's impossible to beat the market consistently
Passive investing is seen as a low cost and low maintenance way to invest and often outperforms active investing over the long run. Invest in low cost diversified exchange-traded funds rather than traded stocks.
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7. Do not trust your instincts
Rationally we may want to buy low and sell high, but our emotions may kick in and we can end up doing precisely the wrong thing at the wrong time - selling when markets tumble and buying when they rise. Having a strategy such as investing consistently and automatically will take out the human emotion element.
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8. Keep an eye on your fees
Whatever investment product you choose, shop around for low fees. Any fees that you are paying to third parties is money that is not working in the market on your behalf. There are many investment provider comparison websites that will do the work for you.
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The bottom line: develop these simple habits today, and you will be on track to reaching your financial goals.
Information provided by goBuoyant is general in nature and does not take into consideration your personal financial situation. It is for educational purposes only and does not constitute formal financial advice. Remember, the value of any investment can go down as well as up.
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