As 2020 rounds out, people are planning their New Year’s Resolutions to help them accomplish their goals next year. These resolutions are often aimed at learning something new, changing habits, and/or bettering your overall life.
Despite great intentions, 80% of New Year’s resolutions fail because the goals that were set were unrealistic. Because of the high failure rate, it is best to start small and build a base of trust with yourself that demonstrates you can achieve smaller goals before you go chasing bigger goals.
New Year’s resolutions that have to do with investing are no exception. If you want to start investing, or get better at it, it is best to not start out with an unrealistic goal. While that sounds simple, there is a lot of grey area between realistic goals and unrealistic ones that can make it difficult to decipher which category a goal falls into.
One easy way to see this is to ask what kind of lifestyle change it will require. For example, if you’ve never traded stocks before, but you want to set a resolution to start trading, you will want to set a goal that doesn’t require you to drastically change your routines from day to day. So instead of saying, "I want to get into stocks this year" or "I want to become a trader," a better approach would be to set the goal as "I want to make steps toward becoming a trader this year."
The distinction between the goals here is that the latter allows you to accomplish and re-accomplish the goal throughout the year in small increments. This allows you to change your mindset from the "I am or I am not" found in the former goals, to one that encourages you to make small, attainable changes.
What it looks like
As the year goes on, a well-written New Year’s resolution evolves and becomes even more attainable after each step towards the goal is met. A beginner looking to make steps towards becoming a trader should start off with a simple goal such as buying stock in their five favorite companies. This means you only have to download an app for a trading platform of their choice, choose five companies whose brands and products you love, and purchase the stocks or stock-slices.
From here you can decide that you want to be more informed about the market and set another simple goal of signing up for Morning Update emails to stay up-to-date with what you need to know about the market in general. After cultivating an interest in the market, you will start to develop your own opinions about the market and what is going to happen. You can then make a goal of diversifying your portfolio with some new stocks or ETFs.
By setting goals like this, you can accomplish the goal of becoming a trader by slowly adding the routine of a trader into your day, step-by-step.
Strategies for experienced investors
This approach isn’t limited to new investors and can be used regardless of your experience. Longer-term investors who want to get into day trading could set a goal to make more short-term trades. Dipping a toe into new strategies is the best way to try it out, rather than jumping in with both feet (and more capital). This allows you to get used to the new routine with less pressure to .
In addition to slowly beefing up your portfolio, you might also want to add a new tool to your investing toolbox. This could be something other than stocks, like foreign exchange, cryptocurrency, commodity markets, or by introducing options into existing trades.
Lastly, investors of all levels should consider new tools to help you evaluate stocks and foster your desire to invest more seriously. Using tools such as the InvestorsObserver proprietary scoring system, Watch Lists, and Stock Screeners greatly enhance the investing experience, making investing a more efficient and do-able habit.