For over more than 23 years of my profession in the field of investments, I have observed that most people fail to continue their investments for the long term.
They start their investments and SIPs with full of energy but after a while their enthusiasm goes for a toss. Then, something or the other would pop up and they would stop their investments. Maybe they would book some property, maybe they simply got fed up with regularly maintaining their savings or simply got frightened by the market volatility which is bound to repeat regularly.
On the other hand there are other types of minority investors who continue their investments regularly for a long period of time without breaking their discipline. They are the ones who really reap the benefit of compounding. They build serious wealth and fulfils their most important financial goals like retirement planning, children higher education, building wealth etc.
So, what’s the difference?
I didn’t know the answer myself till I read a fascinating book “Atomic Habits” by James Clear. In this book the author has described that most habits are outcome oriented and despite a great deal of motivation, they simply fall aside in a short span of time. But on the other hand, if the habits are designed and nurtured as your identity, then they are likely to stick.
For example, if you say that “I want to go to a gym to get my six pack abs”, then the chances are that you may summon your motivation for a few days and then it will evaporate.
But if you say that having good fitness is my identity and this is what I am proud of, then the chances are that going to the gym would stay.
Similarly, I could conclude that people who couldn’t continue their investment are those who focus on the outcome. What is the return I will get? Is it better than a bank return? Is there a better avenue? Should I be able to get the desired corpus? Why should I sacrifice my current pleasure of life? etc etc. They may also invoke their continued beliefs- I am not good at understanding investments, so why should I carry on with investments? Market is so risky, even my friends have discontinued their investments, why should I? These established beliefs get in the way and ultimately they put an end to their investments.
Successful Investors however make investments their identity. They do focus on goals but don’t get obsessed with them. Rather, they pride themselves as smart investors who are aware about their income, expenses, savings and investments. They keep active interest in financial matters, compound interest, economy etc. This knowledge may or may not benefit their investments immediately but they start trusting themselves as aware investors. They even see themselves as capable investors who could actively advise their friends and family members. And once they identify themselves as aware investors, they continue to live up to their own reputation and show to the world their calibre as quality investors.
Moral of the story–
If we work towards establishing our identity as good investors, then the return on investments, big corpus and achievement of financial goals etc will take care of themselves. Who is a better exponent of this theory than the great Warren Buffet himself!
Manoj Pandey
CFP
