Turning investing principles into good investing habits

So just what is a habit?

A habit is:

• a recurrent, often unconscious pattern of behaviour that is acquired through frequent repetition, and,
• an established disposition of mind or character.

As an investor,you need to not only learn to do it well but also to do it with some consistency, and do it without struggling to remember what you did last time.  

As a low volatility investor, you are not likely to be as active trading in the markets as some other investors, and you may not watch as closely.

Any investor - active, inactive, aggressive or low volatility - has a duty to keep up with his or her investments.

For the low volatility investor and others, it is important to develop certain habits, routines, or thought processes for:

• choosing investments,
• watching and managing investments, and
• selling or replacing investments.

With the right habits, you will increase the chances of success.

Turning principles into habits

Investors have obvious goals:  to produce wealth and to preserve capital.

Anything an investor does should address both goals, preferably simultaneously.

As an investor, you are motivated to succeed and, over time, you build a set of strategies and tactics to help you achieve those goals.

"Motivation is what gets you started.  Habit is what keeps you going."

It is easy to get motivated.  It is harder to learn the ropes - the skills and techniques - required to become a good investor.  

But what may be hardest of all, once you gain experience and enjoy some investing success, is to turn those skills into habits.

Habits that become built in, second nature, repeatable and predictable, and not only lead to good results but help you avoid bad ones.

Without consistent habits, low volatility investors will make mistakes and find themselves off in the weeds. 

Good investing habits are like a good golf swing: apply those habits to every investment choice and you won't succeed every time, but your chances for success will brighten considerably.

Habits of Financially Successful People

Sometimes wealth comes to those who are lucky; they win the lottery or they decided to invest in Apple in 1981 when the share price was just $28.83. However, it’s far more likely their wealth came through good habits.

Wealthy people actually have a lot of the same traits and habits that enable them to persevere through difficult times and come out on top with millions (or billions) of dollars. It’s not a coincidence that the rich share these habits.

Of course, that doesn’t mean waking up early and reading more is guaranteed to make you a millionaire in 10, 20, or 30 years. However, there’s no denying the “rags to riches” story. Marketing firm NowSourcing reported that 68% of the Americans on Forbes’ Billionaires List are self-made billionaires—they didn’t inherit their fortunes.

Clearly the right habits can be a roadmap to success. Author Tom Corley interviewed 233 wealthy people and 128 poor people during a 5-year period. He found that the wealthy people had similar habits to one another and the poor people had similar habits, and there was a huge difference between the 2 groups.

The rich are definitely creatures of habit with 84% believing that good habits create opportunity and 76% believing that bad habits have a negative impact.

To-do lists
According to NowSourcing, 81% of wealthy maintain a to-do list and, more than that, they check off at least 70% of that list a day. In comparison, just 9% of people who struggle financially have a to-do list. Having goals and writing them down gives them a purpose, something to strive toward.

Don’t allow a list to overwhelm you, though. Financially successful people focus on accomplishing a specific goal at a time, and they make sure their daily actions are aligned with longer-term goals. While 80% of wealthy people focus on a specific goal, just 12% of poor people do the same.

In order to get through that list and actually accomplish what they want, successful people have learned how to manage their time effectively.


Wake up early
True, there isn’t an overwhelming majority of wealthy people who wake up early, but 44% of them get up 3-plus hours before work, which is far more than the 3% of poor people. In the hours before going to work, successful people focus on self improvement and reading educational material relating to their jobs.

Waking up early is also a common trait of the super wealthy. Many CEOs and business leaders are the type of people who wake up at 5 in the morning, read the paper, send out some emails, and fit in some time to exercise all before heading in to the office.

Keep healthy
Corley found that 70% of wealthy people ate less than 300 junk food calories each day. In comparison, 97% of poor people ate more than 300 junk food calories a day.

True, healthy foods aren’t cheap, but financially successful people try to eat healthy and stay fit because health issues can interfere with their ability to make money. Plus, staying healthy reduces medical expenses and lessens the strain on their finances.
 Three-quarters of successful people are said to exercise aerobically 4 days a week compared to 23% of people who struggle financially.

Read
Instead of relaxing in front of the TV, wealthy people gravitate toward books. Not only does 86% claim that they love to read, but 88% read at least 30 minutes each day and 63% listen to audiobooks during a commute.

According to Corley, the reading that wealthy people do is often for education or for career-related reasons. He also found that 76% read 2 or more education-related, self help-related books a month, which is something the poor don’t do.

Continue to learn
Related to their desire to read, wealthy people believe in the importance in continuing to learn throughout their lives. They put an emphasis on education, reading, and self-improvement and as a result wealthy people commonly adapt and evolve easily.

While 86% of successful people believe in lifelong educational self-improvement, just 5% of those who struggle financially agree.

Successful people stay successful because they aren’t afraid to change their minds or entertain other viewpoints. In their pursuit of knowledge, they allow what they learn to mold them. Continuous learning helps them develop new skills to keep them valuable to shareholders, clients, and consumers.

Surround themselves with other wealthy people
Wealthy people spend a lot of time around other successful people. In fact, 79% network 5 or more hours each month. They place importance on building relationships by returning phone calls, remembering personal information about the people they meet with, and, of course, networking regularly.

Successful people limit their exposure to negative people and naysayers and spend time with those who effect change and who will be a positive influence. They network to find people who can help them on their way to further success.

Even people who haven’t reached financial success should spend time with wealthy people. The best way to pick up their habits and traits is by keeping company with the people whose behaviors you want to emulate.
 

Do what is difficult
People with money work longer, harder, and smarter. They sacrifice today in order to reap the rewards further down the line. And they aren’t happy with the easy road. Instead, they usually make their money by finding the gaps in the market, by coming up with something no one else has before.

Furthermore, successful people are persistent. They don’t let failures keep them down, and, believe it or not, wealthy people usually have even more failures than most people. However, they learn from their mistakes. According to Inc.com, while financially successful people use their mistakes to help them succeed the next time, only 17% of the middle class can say the same.

Successful people realize that mistakes are inevitable. It’s how they react and move forward that sets them apart from the rest of us.


- See more at: http://www.hcplive.com/physicians-money-digest/personal-finance/lbj-habits-of-financially-successful-people/P-3#sthash.Lrjbptfu.dpuf

The seven simple habits of the best investors

While bad habits get all the press, it's really their beneficial flip side we should focus on. Good habits are like super powers that people forget they can have. Somewhere in our subconscious lurk automations - mental patterns and rhythms that we execute regularly - but few people realise just how significant those are.

A 2007 study out of Duke University concluded that as many as 40 per cent of our daily actions are deeply ingrained habits, not conscious decisions. Yes, 40 per cent.

When it comes to investing, it pays to look to those who have done it right before. Here are seven common habits I've identified among the world's best investors.

1. They read. And read, and read, and read ...

If you follow Warren Buffett and Berkshire Hathaway (NYSE: BRK-A, BRK-B), you've probably stumbled across his witty and equally brilliant first mate, Charlie Munger. He's a legend for his insights into successful investing, thought processes, and habits. He nailed a crucial one here: “In my whole life, I have known no wise people who didn't read all the time - none, zero. You'd be amazed at how much Warren reads - at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out.”

2. They seek and demonstrate humility

Koch Industries may not command the recognition of its phonetic relative Coke, but it should. Koch is the second-largest private company in the United States and rakes in more than twice the revenue of the more familiar beverage-maker.

Koch Industries chief financial officer Steve Feilmeier is in charge of deploying the company's massive capital at a reasonable rate of return. When discussing what he looks for in a valuable acquisition for Koch, he said: "There is one in particular that I pay attention to when we're looking at another company, and that is humility."

Humility can be a rare virtue in an industry controlled by animal spirits, but it pays off.

3. They fail

Peter Lynch, the legendary manager of Fidelity's Magellan Fund, absolutely stomped the market over his career, averaging annual returns of 29 per cent. Here's what he had to say on picking winners: "In this business, if you're good, you're right six times out of 10. You're never going to be right nine times out of 10."

That's right. If you're king of the investing mountain, you may narrowly beat a coin toss in the long run.

4. They steal

Maybe "steal" isn't the best word for it. In investing it's called "cloning", or basically borrowing already great investment ideas and making them your own.

When it comes to cloning, no one is a bigger advocate than fund manager Mohnish Pabrai - and few are so successful at it. After managing his fund for more than 18 years and weathering two recessions, his average annual return is 25.7 per cent.

Pabrai breaks his approach down to three strategies, and one of them is, indeed, cloning. It's no coincidence that he has had this idea affirmed by someone else too: Charlie Munger.

5. They evaluate internally

A lot of investors are aware of the need to go against the grain to find success, but the judgment and evaluation of others can be a big psychological weight. It can cause doubt and insecurity in your approach.

Buffett knows this best. He was chastised for trailing the moonshot returns of the tech bubble while he stuck with boring insurance and paint manufacturers. His advice for weathering the storm? An "inner scorecard". As he said in The Snowball, a book about his life: “The big question about how people behave is whether they've got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard ... If all the emphasis is on what the world's going to think about you, forgetting about how you really behave, you'll wind up with an Outer Scorecard.”

6. They practise patience

We got a wonderful reminder of the power of patience here at Fool HQ when co-founder David Gardner's 1997 recommendation of Amazon.com (Nasdaq: AMZN) became a 100-bagger. That return – a gain of 100 times the original investment – is absolutely stunning, but even more impressive is that David was an owner the whole way through.

In his original Amazon recommendation, David wrote: "We're patient investors who buy with the idea of holding on to our latest pick for at least a year or two - if not indefinitely."

He's still holding.

7. They're decisive

Don't confuse patience with indecision. The best investors are poised to act when the right opportunity comes across their radars.

John Paulson and Michael Burry didn't participate in The Greatest Trade Ever by sitting on their hands. When they saw a clear opportunity, they backed up the truck. For Burry, that often meant battling his own investors' anxiety. His fund Scion Capital returned nearly 500 per cent in less than eight years.

Foolish takeaway

Taking the time to cultivate good habits will yield incredible results. As one popular saying goes:

Your actions become your habits,

Your habits become your values,

Your values become your destiny.



Read more: http://www.smh.com.au/business/the-seven-simple-habits-of-the-best-investors-20131112-2xe2o.html#ixzz2kQj29J7f

Can Anyone Become a Millionaire? Yes, yes and yes.

Main points:  

There are 8.99 million households in the United States with a net worth of at least $1 million at the end of 2012.

68% of Americans live paycheck to paycheck.

The truth about the lifestyles of the wealthiest Americans:

• Four out of five millionaires are self-made
• Many millionaires own their own business and consider themselves to be entrepreneurs
• Their companies are rarely glamorous and are more likely to be very ordinary jobs, like paving contractors and pest control businesses

Becoming a millionaire most likely doesn’t just happen to you. Rather, it takes planning and perseverance. Here are some steps you can take to grow your net worth.

Very useful for the younger readers of this blog.

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Rick Rodgers, CFP

Published: Thursday, May 30th 2013

A report released earlier this year from the Chicago-based Spectrem Group estimated there were 8.99 million households in the United States with a net worth of at least $1 million at the end of 2012.

A contrasting report issued late last year from the American Payroll Association showed 68% of Americans live paycheck to paycheck. More than two-thirds of the 30,600 people surveyed said it would be somewhat difficult or very difficult if their paychecks were delayed for a week.

Is it possible for that average American to become a millionaire?

American millionaires are not all greedy corporate executives. Dr. Thomas Stanley has studied the habits of wealthy people for the past 30 years. His groundbreaking research has uncovered the truth about the lifestyles of the wealthiest Americans:
 

• Four out of five millionaires are self-made
• Many millionaires own their own business and consider themselves to be entrepreneurs
• Their companies are rarely glamorous and are more likely to be very ordinary jobs, like paving contractors and pest control businesses

Becoming a millionaire most likely doesn’t just happen to you. Rather, it takes planning and perseverance. Here are some steps you can take to grow your net worth.

Live below your means
This step is so obvious we shouldn’t need to be reminded. Unfortunately, most people never learn to spend less than they make. Unless you discipline yourself to save something from every paycheck, you will never be able to accumulate money that can work for you. The secret to living below your means is to have a budget and work your budget every month.

Save a minimum of 10%
George Clason's classic book The Richest Man in Babylon tells the story of a man who wanted to become wealthy. He started by saving 10% of his income and eventually became wealthy by having his money work for him. Research has shown many of today’s millionaires accumulated their wealth by saving and disciplining themselves to increase their savings every year.

Invest your savings in businesses
Your savings should be put into growth-oriented investments. Not everyone has the ability or desire to start and run their own business. However, we all have the opportunity to own businesses by buying stock. Stock prices can be volatile but you can minimize the volatility by owning stocks through diversified mutual funds. Investing on a regular basis allows you to take advantage of the stock market downturns through dollar cost averaging.

Don’t follow the herd
The Great Panic of 2008 turned out to be one of the greatest buying opportunities. Stock prices fell by more than 50% during this downturn and have recovered to move on to new highs. Unfortunately, many investors sold their stocks during this period instead of buying as evidenced by the net redemptions of stock mutual funds which totaled in the billions.

This prompted legendary investor Warren Buffett to write in an op-ed article for The Wall Street Journal, “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.”

Hire a financial adviser
It’s not easy to stay the course. You often need an independent third party to remind you of your goals and help you make the right financial moves — especially during times of great uncertainty. A good financial adviser will try to help you develop a good investment strategy and keep you focused when you need it most. Investors often make their biggest mistakes by allowing emotions to interfere with good judgment. A financial adviser can help you keep your emotions in check.

Conclusion
Becoming a millionaire is not easy or there would be more of them! It takes discipline to live below your means and to save and invest. One of the millionaires interviewed by Stanley never made more than $60,000 per year.

"I have accumulated most of my net worth by living below my means,” she told him. “I have everything I want, but I have learned not to want too much."

Rick Rodgers, CFP, is president of Rodgers & Associates, “The Retirement Specialists,” in Lancaster, Pa., and author of The New Three-Legged Stool: A Tax Efficient Approach to Retirement Planning. He’s a Certified Retirement Counselor and member of the National Association of Personal Financial Advisers. Rodgers has been featured on national radio and TV shows, including FOX Business News and The 700 Club, and is available to speak at conferences and corporate events (www.RodgersSpeaks.com).

- See more at: http://www.physiciansmoneydigest.com/personal-finance/Can-Anyone-Become-a-Millionaire#sthash.T4CSMvfJ.dpuf

The Power of Mental Habit

A habit is a learned response that has become automatic through repetition.  Once ingrained, the metnal processes by which a habit operates are primarily subconscious.

Four elements are needed to sustain a mental habit:
1.  A belief that drives your behaviour.
2.  A mental strategy - a series of internal conscious and subconscious processes.
3.  A sustaining emotion.
4.  Associated skills.

World's Greatest Investors

Great money managers are like the rock stars of the financial world. The greatest investors have all made a fortune off their success and in many cases, they've helped millions of others achieve similar returns.

These investors differ widely in the strategies and philosophies they applied to their trading; some came up with new and innovative ways to analyze their investments, while others picked securites almost entirely by instinct. Where these investors don't differ is in their ability to consistently beat the market.

Click:
World's Greatest Investors

****Select A Good Stock Market Strategy For Good Returns

Select A Good Stock Market Strategy For Good Returns

Sunday, February 28th, 2010

Stock market can be a good money maker if you know how to play the stock market correctly. A lot of people get into the stock market thinking they can make big money but then lose money by making some rash decisions.

These decisions most often are based on gut feel and not on solid research. Stock market research is the key to making money in the stock market. There are two types of stock market research that can be done in the stock market. Each of the types of research can lead to good amount of money if proper investing discipline is followed.

The two types of research that can be done is

• the fundamental research and 
• the technical analysis research. 

 Both of these styles are very different and require different kind of discipline and methodology while buying the stocks.
In fundamental research you research a stock which has a long term potential and then keep on accumulating this stock for future gains.

• The time horizon for this type of investment strategy can be really long like say two years to four five years. 
• This type of style requires the art of stock picking to be perfected in terms of their fundamental strengths. 
• Also the attributes of this kind of a stock trader are that they are patient and have immense amount of perseverance. 
• They know the art of stock picking and can wait for some time to pick a good stock.

In the Technical research the main emphasis is on trending and the traders thrive on the volatility of the market.

• Based on the trending they buy and sell stocks. 
• Stock quality is important but not to the extent as in fundamental research. 
• Also the main aim here is to make money on a short term basis and do not hold the stock for long. 
• They exploit the inefficiencies in the system as a tool for buying and then selling or offloading the stock once they reach a threshold profit percentage or the stock reaches a particular trend. 
• These traders can also make money in a bearish market.

So if you are investing in the market you will need to enough discipline to follow any approach. There is no middle path and the middle path will not make you enough of profits. So make sure that you follow one strategy and make money from it. Remember patience is a virtue in any business.

New stock market for beginners need to learn about trading strategies. The author recommends stock market for beginners strategies for getting to know how to select a good stock.

The Four Essentials of Successful Investing

In brief, here are the four rules:

• Start early in life to invest.


• Invest in common stocks.


• Be thrifty.


• Pick the right investment.

1. Start early in life to invest

Start young. Many people wait until age 50 before they realize what has happened.

Let's assume you want to have $1 million by age 65. That may not be enough , but it is a lot more than most people ahve when they decide to retire from the world of commerce and frustration.

• If you start at age 35 and can realize an annual return of 10% compounded, you will have to put aside $6,079 each year.


• If you delay until you are 45, it will mean you have to set aside $17,460 each year.


• If you start at age 55, the amount gets a little steep - $62,746!

2. Invest Mostly in Stocks, not Bonds

It takes commitment, even if you start early, to save for the future.

But if you buy bonds, CDs, or a money market fund, the task is even tougher.

Let's try the different ages again, but this time assuming a compound annual return of 6, instead of 10%.

Also, let's assume you want to have $1 million by age 65.

• If you start at age 35 and can realize an annual return of 6% compounded, you will have to put aside $12,649 into CD each year. - that is a lot more than the first illustration.


• If you delay until you are 45, it will mean you have to set aside $27,185 each year.


• If you start at age 55, the amount you will forced to set aside for fixed-income vehicles will be $75,869 each year.

3. Be thrifty (Don't be a Spendthrift)

An important ingredient of successful investing is discipline.

Of course, it pays to earn an above-average salary.

If you make $30,000 a year and have 4 children, you are not likely to end up rich. Sorry about that.

On the other hand, there are plenty of people who make great incomes and still don't own any stocks. The reason: They can always find things to buy.

Successful investors not only make a good income, but they are thrifty shoppers.

For instance, do you need a new car every 2 years? I happen to be rich and I buy used cars. Not rusted-out jalopies - normally, I buy Buicks that are 3 years old.

If you want to find out how people get rich, you should get The Millionaire Next Door by Thomas J. Stanley and William D. Danko. Typically, millionaires are extremely careful how they spend their money and they invest in good-quality common stocks with very infrequent trading.
Invest enough to make it worthwhile, such as 10% of your income. You can do this if you are thrifty.





4. Picking the Right Investments


The final factor is picking the right stocks or mutual funds.


Surprisingly, this is the least important factor. That is because no one knows how to do it consistenly.

There are mutual funds with good records, but those managers are rarely able to duplicate their performance year after year. However, that shouldn't deter you from trying. You will pick your share of winners if you do your homework and exercise patience.

Finally, make sure you don't make any big bets. Diversify over a few stocks in different sectors or industries.

You will need to be financially educated and do enough reading to ensure you pick stocks that have the potential to make you rich.