Discover habits of effective investors

A woman sitting at a desk works on a laptop.

Although their financial goals may vary, effective investors often share habits and behaviors that all investors should consider adopting.

Many successful investors often have similar habits. Discover what some of them are and learn about why these might be habits worth forming.

Goal setting comes first

Successful investors often set clear goals and make it a priority to work toward them. Sometimes this even means saving to reach that long-term goal versus spending on something fun now.

A tip that can help make this a habit: Have an answer to the question “What’s the money for?” so you feel that your investing has a purpose.

Planning is essential

For successful investors, an investment plan often starts with asking three questions:

  • How much does your money need to grow?
  • How long can you leave the money invested before you need to access it?
  • How much risk are you willing to take with your money to help reach that financial goal?

Focus on diversification

Effective investors often focus on creating all-weather portfolios — well diversified to help manage investment risk.

This means focusing on a variety of investment types (such as stocks, bonds, and cash; U.S. and international investments; and real assets) as a way to help reduce the overall risk in a portfolio versus having all your investment eggs in one basket.

Rebalance when necessary

Effective investors often make a habit of reviewing and rebalancing their portfolios regularly. An unattended portfolio can grow in some areas and shrink in others, which can eventually cause it to drift away from the individual’s plan, goals, or risk tolerance.

Periodically reviewing your portfolio allows you to adjust your investments to help you stay on track.

It’s easy to get distracted by scary headlines, or tempted by exciting ones, but effective investing is not about “winning” or “losing.” Instead of focusing on short-term volatility, effective investors develop and stick to a plan to help them remain focused on their goals regardless of recent market activity.

All investing involves risks including the possible loss of principal. Equity securities are subject to market risk which means their value may fluctuate in response to general economic and market conditions and the perception of individual issuers. Investments in equity securities are generally more volatile than other types of securities.

Asset allocation and diversification are investment methods used to help manage risk. They do not guarantee investment returns or eliminate risk of loss including in a declining market.

Investments in fixed-income securities are subject to market, interest rate, credit, and other risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can cause a bond’s price to fall. Credit risk is the risk that an issuer will default on payments of interest and/or principal. This risk is heightened in lower-rated bonds. If sold prior to maturity, fixed-income securities are subject to market risk. All fixed-income investments may be worth less than their original cost upon redemption or maturity.

There are special risks associated with an investment in real estate, including the possible illiquidity of the underlying properties, credit risk, interest rate fluctuations, and the impact of varied economic conditions

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC (WFCS) and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company. WellsTrade® and Intuitive Investor® accounts are offered through WFCS.