Paul Clitheroe's Making Money: A plan out powers positive thinking for investment success

After 30-plus years in the money business I've come across all manner of trends, oddball ideas and get-rich-quick schemes. But nothing beats proven rules for long term investment success.
By · 12 Oct 2023
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12 Oct 2023 · 5 min read
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I’m sure most seasoned investors have encountered a wide variety of questionable products, services and even dodgy views, when it comes to investing.   

I certainly have, and while our investment watchdog ASIC has clamped down on ‘finfluencers’ – online ‘influencers’ offering what is often unlicensed financial advice, the internet is still awash with some worrying views around investing. 

It turns out that ‘manifesting’ is the latest ‘wellness trend’ to be exposed as bunkum. 

If you’re not familiar with the term (as I wasn’t), manifesting is all about the power of aspirational thinking. In other words, willing your way to wealth.  

Researchers at the University of Queensland’s Business School looked into manifesting and the psychology behind the idea of achieving success through aspirational thinking. 

The study found there are plenty of self-described experts, gurus, and influencers who promise success through manifestation. But many of the beliefs and practices being spruiked “lack solid evidence”. No surprises there.  

What the university did find is that committed ‘manifesters’ are more likely to have strong aspirations for success. They are also more likely to be drawn to risky investments, to have experienced bankruptcy, and dangerously believe they could achieve an unlikely level of success more quickly, which means they may not see the pitfalls of get-rich-quick schemes. 

It seems to me that while times change and technology advances, our innate human desire to get rich fast, with minimal sacrifice or effort on our behalf, inevitably leads us into murky waters – be it unregulated markets such as cryptocurrencies, investment scams or unproven ideas like manifesting. 

Here are my top three rules for successful investing

1. Understand that risk equals return 

Carve the words ‘risk equals return’ into your bathroom mirror so you can see them every morning. Taking excessive risk chasing big returns is the number one reason why investors lose money. 

Be aware of risk. Ask questions and understand the true nature of risk in an investment before you tip money into it. 

2. Don’t try to time the market 

It’s pretty obvious that if you buy when things are cheap, and sell when they are expensive, you’ll make money. But guess what most investors tend to do? They follow the hype and buy when investments are expensive, then sell when the market cycles turns and assets fall in value. It’s a recipe for financial ruin. 

Quite simply, when it comes to making money, time in the market beats market timing hands down. 

3. Diversify 

In broad terms, I recommend you have three pools of wealth – your home, your super and other investments. This gives you diversification from a tax, asset class and legislative perspective. 

How you diversify will depend on your age, income, family stage and so on. As a rule, as you get older you will want to diversify more as your wealth grows to reduce the level of risk in your portfolio.  

Take action for success

Anyone can be a successful investor by following a simple prescription: spread risk over a diversified range of quality assets and hang onto those assets for the long term through the good times and the not-so-good.  

And yes, there is something else – take action

No one ever got rich by doing nothing (unless you’re lucky enough to inherit a fortune). Simply willing yourself to be a successful investor is no plan at all. 

You generate wealth by doing something. This might seem obvious but it needs saying. 

All of the mainstream investment classes produce reasonable returns over time. But the key words here are ‘over time’. It makes patience and commitment two key ingredients for success as an investor.  

I’m all for the power of positive thinking. But without a simple investment plan to follow it can be very easy to get your fingers burnt by pinning your hopes on the next unproven trend.

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