There are different types of investment vehicles or asset classes that, when used skilfully, can help investors build wealth and achieve life goals. But while everyone certainly wants to reap profits all the time, the reality is that setbacks do, and will, occur.
If you are nursing an investment that is not doing well, or have recently exited from one and are uncertain about how to proceed, here are eight useful tips.
1. Take a break
Investment choices that aren’t working out are bound to impact your overall financial situation. As such, it’s a good idea to take a step back, or go on a break altogether.
Give yourself some space to clear your mind so you are more refreshed when you review and make new plans, and can view your investment decisions more objectively.
2. Revisit your goals
With a rejuvenated mind, take another look at the purpose of your investment and how it fits into your life goals – whether it’s for your children’s education, your retirement, or to build wealth in general.
It is vital to be aware of its purpose so you have a clear exit plan. Consider how further action on this investment – whether you hold, sell, or switch – will impact your short- and long-term objectives.
3. View the failing investment against overall asset allocation
List all your assets and calculate the holding percentage of each against its whole. This is important because an investment of RM50,000, for instance, might be 8% or 50% of your overall asset allocation.
Those who hold 8% will feel more relaxed compared with those who hold 50%.
4. Explore learning points
Identify what you have done well and what you want to maintain doing moving forward. This will help you gain new knowledge such as the legal process for property investment (if applicable), methods and means towards better financial decisions, and an understanding of your own risk appetite.
5. Review what went wrong
Reflect on what went wrong and how you can improve. You might feel like exploring the root cause is painful and want to avoid doing it, but this is an important step to avoid repeating mistakes.
The root cause could be due to internal or external factors. Internal factors might be your own lack of understanding of investment features, or omission of clear intent and purpose for the investment.
External factors could be surrounding influences, misleading information received, and so on.
Shift your focus to the positive (personal growth), rather than the negative (dwelling on mistakes).
6. Explore possible alternatives
List down potential alternatives that might reduce the financial impact of the failed/failing investment, or even enhance your financial situation. Consider how these alternatives will impact you in the short- and long-term.
By focusing on data, you can reduce the emotional element and have more justifiable factors to consider as part of your financial decision-making process.
7. Focus on what you can control
With all the above input, you should have a clearer idea as to what to do next. There will, however, be times when external and avoidable factors come into play; should this happen, focus on what you can control and move forward with your plans.
8. Consider professional advice
Some people might feel a little overwhelmed by the above. Whether it leads to overthinking or the inability to take action, it may be valuable to get a licensed professional’s opinion.
Disappointments are inevitable in life, but these are often experiences you can grow from. The same applies to the world of investing, and the lessons you learn will undoubtedly prove beneficial to building your wealth moving forward.
This article was written by Felicia Lim Hui Chi and first appeared in MyPF. Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.