Are You Your Own Worst Enemy When It Comes to Investing?

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You may not realize how you’re setting yourself up for failure. 

Investing money is a great way to grow your cash into a larger sum and meet different goals, whether it’s putting your kids through college or retiring in a secure fashion. But while you might have the best of intentions when it comes to investing, you might also easily get led astray.

In a recent tweet, investing guru Graham Stephan quoted economist Benjamin Graham by saying, “The investor’s chief problem — and even his worst enemy — is likely to be himself.”

Stephan then went on to ask “How do you hold yourself accountable to stick to your investing plan?”

It’s a valid question. Many people tell themselves they’ll invest consistently, only to end up spending their money before it gets a chance to hit their retirement or brokerage account. If that’s a trap you’ve fallen into in the past, the solution could boil down to putting the process of saving and investing on autopilot.

Take human error and impulse spending out of the equation

Many investment accounts allow you to contribute funds automatically so it’s easier to stay on track. Taking advantage of this option could spell the difference between meeting your goals and falling short.

Let’s say you’ve been meaning to invest $200 a month in your brokerage account, only you keep finding other ways to spend your money before you get a chance to buy stocks with it. In that case, an easy solution could be to arrange for an automatic transfer from your checking account to your brokerage account every month — ideally, at the start of the month. That should remove the temptation to spend that money, since it won’t be accessible to you in your checking account any longer.

The same strategy can be applied to retirement savings. In fact, the great thing about employer-sponsored 401(k) plans is that they’re funded through payroll deductions. So if you commit to contributing $200 a month to your workplace 401(k), that $200 will be removed from your paycheck before it hits your bank account, thereby removing the temptation to spend it.

The good news is that most IRA plans offer an automatic savings option, too. So if you don’t have access to a 401(k) plan, you can arrange for your IRA to get funded automatically.

Don’t get in the way of your own goals

You’re only human. And while you may be very motivated to save and invest consistently, life might get in the way. If you make a point to automate transfers into a brokerage account or IRA, you’ll be more likely to stay on track and stick to your investing plan. And that could set the stage for a lot of long-term financial success.

That said, getting money into your account is only part of the equation. You’ll also need to make sure you stick to your investing strategy.

It’s easy to get thrown when market conditions aren’t favorable. So a good bet in that regard is to employ a strategy called dollar-cost averaging. With this tactic, you commit to investing a certain amount of money in specific assets on a regular basis.

Now, for you to be able to use this strategy, that money has to land in an account you invest in. But from there, you can also put your actual investments on autopilot so you don’t stray from your plans or get spooked by market turbulence.

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