Most people get stressed out when thinking about managing their money; seeing it as just too complicated.
So to help you out, here are five simple ways to increase the odds of getting in and staying in good financial shape. We consider these five steps as key investor habits.
Technology is there for a reason.
Every Investor should use it.
Set up an automatic salary deduction or a standard order, your human resource department or bank can facilitate this. More companies are giving employees this option.
Ideally, with every paycheck, have your bank send a set amount directly from an account to an investment account. You won’t miss what you don’t see in your account/salary. If you can, increase that amount over time.
The point is just to get in the habit. Even if you start small, it’s a start. And seeing your money grow can be very motivating.
2. Expect Financial Emergencies
Most persons cannot cover an emergency expense without selling something or borrowing money. So setting up an emergency fund is essential.
A more daunting prospect than needing a couple of thousands for a car repair or emergency dental work is saving in case of a layoff.
We recommend building a stash that will see you through six months of expenses. The older you are and the higher your salary, the bigger your emergency fund should be, since it may take longer to find a job you want.
3. Set An Asset Allocation And Diversify
Asset allocation is one of the most important decisions for every investor. The vast majority of returns over time come from asset allocation rather than picking the right security or the right time to invest in the market.
One rule of thumb used for setting a stock-bond allocation is that your age should equal your bond allocation. A 50-50 or 60-40 split is a good starting point, but then you need to figure out your risk tolerance and tweak your portfolio to reflect that.
Remember, investment is customized, your risk tolerance depends on you.
4. Keep Fees Low
It is important to keep fees low.
Most investors tend to panic when a stock drops, however this can provide a great buying opportunity to lower your average cost.
Focus on a cost-effective strategy.
5. Spend Less Than You Earn
Spending more than you earn has become a pattern in Jamaica. So it’s not surprising that less than a third of the population has an emergency fund in place.
Part of what can make it tough to build an emergency fund is “keeping up with the jones” lifestyle.
As we (hopefully) earn more, we often ratchet up our spending—we upgrade phones or cars or take fancier vacations—rather than increasing our retirement contributions or setting a higher amount of savings to be taken out of a salary automatically.
If you spend less than you earn, you can likely avoid getting trapped in any downward financial spiral. That can happen if you need to take out a high-interest rate loan to pay for a financial emergency you haven’t saved for.
If you want to start investing with SSL but don’t have the time to monitor the market or to conduct the trades yourself then you can choose one of SSL’s managed Financial Planning products. We offer a variety of products for every type of investor and if you are interested in managing online trades yourself and having complete control over your investment portfolio then you can try SSL’s Brokerage account.