The Seven Habits of Highly Effective Investors – Do You Have Them?

April 24, 2015

Last year, BlackRock, a multinational investment company, surveyed over 27,000 individuals across 50 countries to get a feel for what has been on the minds of investors recently. The survey found that one of the top concerns for Americans was having enough saved for retirement, noting that most individuals had only saved enough to fully fund less than two years of retirement. While that statistic is frightening, the study did find that among those who were successively saving for retirement, a handful of common “habits” were observed. These “7 Key Habits” included 

  • regularly reviewing finances

  • spending time to get informed

  • seeking financial advice

  • managing debt

  • prioritizing saving for retirement

  • diversifying portfolios

  • planning for big moments

Reviewing Finances


One of the easiest ways to ensure a successful retirement is to take the time to create a household budget and discuss how income will be allocated going forward. While this may sound daunting, taking the time to plan ahead can make a big difference down the road and creating a savings plan such as committing to contributing a set portion of your paycheck each month, or having your bonus go directly to your retirement savings can help ensure that you’re on the right path to a feasible retirement.


Being Informed


While it’s not difficult to get information in this day and age, it can be increasingly more difficult to determine what information is valuable and what information is just noise. It’s always a good idea to start by questioning how the provider of information is making money. When an article makes its’ money from surrounding advertisements, it’s less likely to be unbiased than an article that makes its money from the content of the article itself. Other good sources of information include scholarly websites backed by government or academic institutions.


Seeking Financial Advice


Similar to the availability of information, there is a plethora of financial content available today, but it’s hard to discern the good from the bad. One way to judge the soundness of financial advice is to reference the certifications and quality of the author and what their intentions are. It’s also always a good idea to compare advice from various sources particularly if you already know that some of those sources are unbiased.  For example, if an advisor gives you tax advice, do a quick search on the IRS' website to see if the advice matches up.


Managing Debt


While debt is not necessarily a bad thing, too much debt can be consuming and difficult to overcome, particularly when it comes to saving for retirement. Whether you’re in the initial budgeting stage or have already begun to accumulate debt, it’s a good idea to create a game plan for how to manage and eventually pay down debt. When appropriate, discuss with your financial advisor the priority that paying off debt should take in your savings plan.


Prioritizing Saving for Retirement


It’s easy to think of saving for retirement as something to deal with down the road, but the truth of the matter is that kicking the can will inevitably lead to a lack of savings when you finally arrive at retirements’ doorstep. That’s why it’s important to make retirement a priority today and not tomorrow. One potential method for saving for retirement is to commit to saving a certain amount each month before contributing to your discretionary spending account. In reality, this may look something like committing to maxing out your retirement account for the year before going on vacation. While it may mean you have to take a smaller vacation, it will also ensure that you won’t run out of money later on.




While it’s incredibly important to save for retirement, it’s also important to invest intelligently for retirement. This means spreading your savings over the right asset allocation to generate the returns that you’ll need to meet your goals. On the one hand, this means making sure not to put all of your savings in the hottest stock being talked about in the news, and on the other hand it means not leaving all of your savings in cash. Having a smart strategy is key to this healthy habit.


Big Moments


Big moments include things like buying a home, paying for your kids’ college, and ultimately retiring. Effective investors invest with those big moments in mind making sure not to invest the kids’ college fund aggressively the year before it's needed. A good strategy sees the whole road ahead, not just the next 50 feet.


While there are a variety of other healthy habits that can help you become a more effective investor, these habits, backed by the success of the individuals exhibiting them, are a great starting place for ensuring an easy, peaceful retirement. To learn more about effective planning, how to budget, and the best diversification strategy, give one of our advisors a call today.


“What Investors Are Thinking.” (July/August 2014). BlackRock Investments LLC.

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