What makes an investor great? For those new to investing, the naive answer often includes phrases like ultra-high returns, big bets, or risk-taking. But the research shows otherwise.
In a Harvard Business Review article, researchers describe the difference between companies in the consumer packaged goods (CPG) industry who gain momentum through innovation, specifically when it comes to R&D spend.
Very large R&D budgets are incentivized to pursue expensive, large-scale innovation efforts that have the potential to become blockbuster new products.
These companies, which swing for the fences, oftentimes find themselves on the losing side of the bet.
Instead, the less celebrated path of small, even incremental, progress in CPG companies outpaces the blockbuster swings of those looking to increase their returns quickly. The data shows that the slow steady drip of incremental progress wins the day.
The same is true for investing.
When it comes to winning, in the long run, it is better for Millennials to focus on steadily savings – especially to set your base or cushion. Then, as you progress toward investing, resist the urge to chase returns.
Use companies like Bloom or Personal Capital to help you find areas to slash your investing fees. Or if you are having trouble finding extra money to begin investing, check our companies like Trim Financial Manager to help you cut spending – then invest those extra dollars.
As you start your investing momentum and the drip continues, avoid the temptation to invest too much in single stock, sector, or market.
Swinging for the fences can yield low returns.
The skill of harnessing that temptation, it what makes for a great investor.