- Financial advisors preach the "set it and forget it" approach to long-term stock investing.
- It is important to check emotions at the door, according to Grant Sabatier, who turned $2.26 into $1 million.
- However, new investors won't ever become comfortable with money and markets if they don't actively engage with their portfolio on a daily basis.
Daily fluctuations in the stock market can scare even the most seasoned investors. At the end of 2018, the S&P 500 lost nearly all its yearly gains. Six months into 2019 and the stock market has not only recovered all its losses but is at an all-time high.
Grant Sabatier, author of "Financial Freedom: A Proven Path to All the Money You Will Ever Need," knows a thing or two about investing. In five years, Grant was able to go from $2.26 in his bank account to over $1 million. It was not easy, but Grant says "checking (his) emotions at the door" allowed him to stay calm and invest for the long term.
Grant was not always so calm. "When I was 21 I bought a stock that I knew little about," the successful investor recalled of his first foray into the market. After 24 hours of watching the stock's ticker symbol go up and down, Grant's anxiety got the better of him and he sold his investment at a 50% loss. This miscalculation taught Grant that when investing in the markets you need to stay focused on long-term returns. "It's what is happening over the next five, 10-, 20-, 30-plus years," he said.
But that does not mean investors should tune out what is going on with their market money day-to-day.
New investors may have an uneasy relationship with money. Many are uncomfortable with the idea of putting their money in something other than a savings account. That is a reason why financial experts will tell first-time market investors to "set it and forget." That's a reference to keeping money in the market for the long-term and not checking portfolios on a daily basis or obsessing over short-term fluctuations.
Sabatier has a different piece of advice. "The more time you spend with your money, the more comfortable you get with it."
He recommends taking five minutes each morning to review your investment performance, or what he calls his "money meditation." Similar to exposure therapy — a behavioral therapy practice through which the patient is exposed to the anxiety source or its context without the intention to cause any danger, but rather, to help them overcome their anxiety — the more time people spend tracking their money the more comfortable they get with volatility. Then it becomes easier to leave your emotions behind when making important investment decisions.
This method may not work best for everyone, and it is important to find out which methods best suits your investment strategy. But getting comfortable with the volatility of markets and increasing your personal finance knowledge are keys to a successful investing career.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.