Humans are creatures of habit. We get some sort of payoff from the action, so we continue. Procrastination, for example, is just so darn easy to fall into because…you really don't have to do anything at all. But all our bad habits come with their own costs and they add up.
Investors can short-circuit their returns through a wide variety of bad habits. They all could be costing you a fortune. Are any of these four bad habits holding you back from becoming wealthy?
– Not regularly investing
Many people just don't save enough, so they don't have much opportunity to grow their investments. Real wealth is grown through compounding value over time. What percentage of your income do you personally save? Do you have a regular investing plan?
– Being moved by the market
It's okay to stay informed about the financial market. But if you find yourself feeling bad or scared when the market is down, or feeling good when the market is up, you're caught in the rhythm of the market. That emotion can keep you buying stocks when you should be getting out and make you pause to buy good stocks when the market sells off. You buy high and sell low – the opposite of the age-old investing rule.
– Borrowing on margin
People borrow money to buy houses, but buying stocks on margin is rife with danger. As forex traders in Swiss francs found out recently, when the market suddenly drops low enough you may be forced to sell your stock by your broker at the very time you should buy stock. Margin lending takes away your power to stay put with your stocks or even buy more at bargain discounts.
– Not remembering why you own a stock
If you don't have a plan when you buy a stock, you probably won't remember why you own it several months from now. "A stock well bought is half sold" is the old saying. If you have a habit of buying stocks on the fly with not much reason, you'll probably end up holding the stock well after its story turns bad.
One good habit you can start right now is investing for the long-term. Not a bet or quick turn, but investing your money in solid companies that can pay you a dividend for many, many years. Companies like Suncorp Group Ltd (ASX: SUN) and Woolworths Limited (ASX: WOW) are stable and growing businesses with good past records for increasing dividends. They may be good dividend income stocks in your portfolio going into the future as well.
