Many people think that the stock market is hard to get into or that they aren’t smart enough to make any money investing. However, this is a short-sighted approach, especially considering the fact that all major economic downturns only look like blips on the stock market’s chart of overall gains over time. In fact, one of the worst things you can do as an investor is wait to start investing, since every year you’re out of the market is a year you aren’t taking advantage of compound interest.
That being said, how does one get started becoming an independent investor? While you probably know that not handing over a few percentage points of your gains to a financial advisor makes sense, you still may be unsure of how to get things rolling. Here are five simple tips for becoming an independent investor.
Set goals for yourself.
While it may seem a bit odd at first to use a platform like Profit.co to track your own personal goals when it comes to investing, being able to check in on your progress on a quarterly basis using a framework like OKRs is actually a big benefit for many investors. The OKR process stands for objectives and key results and just defining and thinking about your goals in terms of what you want to achieve and what steps will help you find success can be a great way to hold yourself accountable to your investing strategy and goals. Profit streamlines OKRs, helping you focus specifically on planning, executing, and learning from the OKRs you achieve and the ones you fall short on.
Pick a strategy — and stick to it.
Once you know what sorts of goals you’re looking to achieve, it’s time pick an investment strategy. There are dozens of different options out there, and ultimately the best strategy to pick is the one you’re likely to stick to. For example, you might want to adopt the Canadian Couch Potato portfolio strategy, which is an effective way to passively build your income by focusing on ETFs and index funds. You can learn more about the strategy on the Canadian Couch Potato blog and then integrate the strategy using an automated investment tool like Passiv. This makes it even easier to stick to your plan.
Focus on the longterm.
Especially during major economic catastrophes (like the global coronavirus pandemic), you may be worried about your investments. That being said, it’s important to focus on the longterm. If you don’t think about your future self, you might be tempted to make some bad decisions, ultimately hurting your chances of building wealth.
Don’t make knee-jerk reactions.
The other side of the previous tip about focusing on the longterm is that you don’t want to rush into any decisions. Even as the stock market is tanking, it’s important to stick to your strategy instead of making a reactive choice that jeopardizes your future investments. Bad investment advice is to try and time the market, when in actuality, steadily investing over the years is the easiest and best way to build wealth.
Increase your investments each time you get a raise.
One other tip to keep in mind as you’re pursuing becoming an independent investor is to scale your contributions up each time you get a raise. For example, if you get a raise at work or a promotion that comes with a hefty increase in the amount of your salary, it’s a good idea to put some of that money towards your monthly contribution amount. This ensures that you don’t wind up spending your raise completely, allowing you to increase how much you’re investing on an annual basis without feeling like you’re making a sacrifice and frittering away your raise.