Six Life Lessons That Also Apply to Investing

Like anything in life, a positive investing journey is more than just financial returns.

Regardless of your level of investing experience, you have probably dealt with uncertainty, considered benefits and risks, and made well thought out trade-off decisions. You have tackled many obstacles in life, which also happen to be the main obstacles in investing.

Investing should help us live better, more fulfilling lives but the reality is, gaining satisfaction from the investments we hold involves more than just financial gains. It involves our feelings and emotions throughout our investing journey. We can view money as a tool that empowers our plans rather than as an end in and of itself by fusing our investment and life philosophies. Here are six ideas that can benefit us both in life and in our investments:

Opportunity Arises from Uncertainty

Although uncertainty can be unsettling, opportunities would not exist without it. We never know what will happen when we decide to change careers or relocate to a new city. However, these encounters aid in our personal development and help us grow and adapt to changes in life.

Investment returns are what we get in exchange for assuming risk. Without risk, there would be no reward. But not investing also carries some danger as well. Our money won’t go as far in the future if it doesn’t grow over time.

This approach to life and investing helps us to stay focused on the opportunities that lie ahead while guiding us through uncertain times.

Don’t Predict, Simply Plan

Since none of us possess a crystal ball, we must devise plans of action to help us cope with an unknown future. We submit applications to more than our top universities picks. We arrive at the airport three hours early and pack more than we think we’ll need. On a boat, even if we can swim, we put on a life jacket.

Similar to life, investing involves creating plans that take into consideration a wide range of potential outcomes. In this sense, rather than being immobilised by the unknown, we might feel empowered by it.

Studies have indicated that market returns are not steady. It is therefore preferable to concentrate on making plans for potential outcomes rather than attempting to forecast what will occur. The good news is that having a positive investing experience doesn’t require us to be stock pickers. Based on the S&P 500 index’s annual returns from 1926 to 2022, markets have returned, on average, 10% annually during the last century. And any investor can access the market’s returns by using a variety of inexpensive, diversified tactics.

Therefore, trust the markets rather than trying to outsmart them, and be ready for occasional short-term setbacks. In the long run, the chances are that your investing experience will be better.

Flexibility Adds Value

You most likely have a clear idea of what you want in a new car—down to the colour of the interior trim. However, finding the exact model and features you want can be challenging, and even then, you may need to pay more for them.

If you’re willing to be flexible — maybe going with black instead of grey — you can get that new car faster, and at a better price.

For many investors, index funds are a good, inexpensive option, but in order to track their index, they must trade on specific days. Investors may leave money on the table if the funds don’t obtain the best prices on the securities they own.

Make Use Of The Power Of Compounding

Over time, even seemingly insignificant decisions can have a significant effect. Whether we’re studying a foreign language or preparing for a marathon, every step we take gets us closer to our objectives.

Investing is no different. Your money would double every seven years if you received an annual 10% return on your investment, which is comparable to the historical annualised average of the stock market. An investor might compensate for not having a large amount of money to invest right away by starting early.

Compounding is an important concept in both investing and life. Although many people believe they don’t have enough money for investments, even modest savings can help you reach your goal.

Control What You Can Control

We have little control over so many things in life, whether it be the weather or the fate of our favourite sports teams. On the other hand, we have control over how we anticipate and respond to life’s setbacks. Even though we don’t always require an umbrella, they are useful when something unexpected happens.

You have no control over the market’s ups and downs when investing. However, the amount of money you save, the level of risk you accept, and the advice and research you seek out while creating an investing strategy that works for you are all under your control.

Ignore The Noise

It can be distracting, even disastrous, to let other people’s opinions distract us from achieving our goals. If your new workout regimen is working for you, who cares if a friend disagrees with it? Once you’ve come up with an informed road map for success, rally your supporters and turn down the volume on your detractors.

Having this type of mindset is also key to your long-term investing success. Many of us are constantly exposed to investment commentary, whether it comes from friends promoting the “next big investment,” TV pundits making bold forecasts, or our smartphones constantly updating us with the newest information. Anything that looks too good to be true usually is, and if we give in to our “fear of missing out,” we may pay a heavy price in the shape of lifetime poorer returns.

Since everyone is aware that markets fluctuate, downturns can disappoint us but shouldn’t come as a surprise. The performance of your portfolio may suffer more from your emotional response to market volatility than from the actual drawdown.