Financial mistakes the wealthy NEVER make
We all make mistakes, yet there are a few bad habits the super-rich tend to avoid. Here are five money missteps that may be keeping you from getting rich.
Doing it yourself
When the stock market drops, as it inevitably will, you have to be able to take emotion out of decision making. If you don’t have time to spend a few hours a day tracking the market, the cost of a good financial advisor is well worth the investment.
Wealthy people don’t try to manage their money themselves, they hire professionals to protect and grow their assets, and to manage their risk.
In some years there will be losses, but during the bad years, a qualified advisor can help you mitigate these losses and keep you invested when emotions are telling you otherwise.
Individuals trying to manage their own finances are notorious for being too concentrated and too aggressive in their holdings. The wealthy look at things from a risk management perspective rather than from a pure returns potential perspective.
Remember Nortel, Lehman Brothers, Enron, all big, supposedly disaster proof companies. All bankrupt with massive investor losses.
In Vancouver we are lucky in that most of us have been blessed by the dramatic rise in real estate prices, mimicking the wealthy who generally have stock and bond holdings, but are also usually well diversified into real estate.
Bitcoin, Cannabis, the latest Vancouver mining company, the list goes on. Wealthy investors do not waste their time chasing pipe dreams, nor should you. They are investors not speculators.
Lack of a long term plan
Wealthy investors are patient and don’t necessarily think about short-term returns. Wealth is accumulated over time not overnight. It is of vital importance to sit down and plan your financial future, and how you are going to invest over the next 10, 15, 20+ years, not the next 5, 10, 15 days.
Investing is a long term game, and you should act accordingly. Long term themes should be looked at, not daily news headlines. The only person who enjoys those is Trump. You generally don’t need all of your investments at any one time, so you should not worry about the value of an investment temporarily going down as there should be other investments to draw on.
Yes the wealthy have many more resources to lean on, but with diversification, so should you, just to a lesser extent.
Remember, generally over the long term wealthy people who are happy got that way because they were optimistic about the long term investment outlook, regardless of what short term hurdles they may encounter along the way.
Current GIC rates*
Sept 13 2019
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