What really matters for investing success?

Picking the right stock gets all the attention, but it’s only a tiny part of the investing puzzle. There are many other ingredients in the financial recipe that are much more important than finding the perfect stock to buy.

So what really matters for investing success?

There are three key activities that have an impact on finding the right company to bet on.

1. Consistent savings stack up

The more money you save, the more you can invest. For most people, especially newer investors, just getting into the habit of saving 10-20% of each paycheck will do much more for your financial well-being than any kind of secret stock picking method.

Imagine you have RM1,000 to invest right now, and you’re saving an extra RM100 per month. You pick the perfect stock and it doubles in price. Assuming you put all your eggs in that basket, you’re up RM1,000. Well done!

This still represents less than a year of your savings. There’s no guarantee to replicate this success with the next stock pick. On the other hand, it should be pretty simple to consistently pay oneself first every time the employer makes a direct deposit.

Why Investing Success Isn’t Really About Picking Stocks

2. Low fees are key

Another facet of investing is the high cost of fees. When these fees compound for years on end they can have a double-digit impact on your returns.

It doesn’t matter whether you’re an investor managing your own brokerage account or simply accumulating mutual funds under the guidance of a financial advisor. In both cases, you need to be very careful about overpaying.

For the self-directed trader, commissions can quickly add up. So having clear guidelines of when to buy and sell is of paramount importance.

Investors are likely to have less time in the market which keeps them out of potential upsides. Check out a discount broker or the zero-commission mobile trading app, Robinhood.

Those working with an advisor may potentially be worse off. Many popular mutual funds have hidden commission fees which can end up costing them 1% or more each year.

While this might not sound like a lot, the fees can seriously add up over time. Luckily, there are newer low-cost options like Betterment, which help you build a diversified long-term portfolio at a fraction of the typical cost.

3. Make a plan and stick with it

While regular savings and a low-fee approach are a great way to get started building your wealth, there’s still one big consideration. If investors can’t stick with their investment plan, they’re likely to bail out at the worst possible time.

Mutual fund flow data confirms that buy and hold investors are likely to sell at the worst possible time. This kind of knee-jerk panic reaction can add years to their retirement timeline. They can improve their chances of success with some disciplined upfront planning.

Consider looking at sample investment profile questionnaires online, or meeting a fee-only financial planner to help understand how a mix of assets should be adjusted based on risk tolerance and investment timeline.

When picking stocks, determine investment trading signals, criteria and plan ahead of time.

Conclusion: Focus on what an investor can control

Picking great stocks consistently isn’t easy. But there are other levers investors can pull to really drive their investing success for the long term.

No method of stock picking really matters unless investors have these foundational financial habits in place!

This article first appeared in thenewsavvy.com

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