Make the world go round
Today's post is probably intermediate level. If you have not started investing yet you may find it more helpful to read some of the earlier posts and work on your own financial plan before worrying about details like I am at the moment. If you already have a plan of your own, or you are interested in hearing about first world problems, read on :)
I have an account with Rakuten Securities which I mainly use to buy US dividend stocks. There are a couple of other things in there at the moment that I am waiting for the right moment to sell, but it's mostly dividend stocks.
Yesterday I noticed that concern over a Portuguese bank had caused European stocks, especially banks, to fall sharply. Santander, a bank I have a few shares of, was down 6%. I went onto Rakuten and bought some. A couple of hours later, the stock had recovered a bit and I had made a small paper profit and secured some more dividends at a favorable price.
So far so good, you might think, but I realized quite quickly that I had made a mistake. I allowed a change in circumstances to disrupt my plan. Regardless of the outcome, deviating from the plan is probably not in my long-term interest.
My plan for this account was to buy my NISA allowance each year and save small amounts in dollars each month to allow me to do that. Buying on impulse outside of the NISA account (I already used up my allowance for this year) is definitely NOT part of the plan.
Clearly my old plan was not specific enough.
So I made a new one. The new plan is as follows:
1. save money each month into the Rakuten $US denominated account until it reaches $10,000
2. on mid-March, May, July, September, and November, buy $2000-worth of dividend stocks in my NISA account
3. save and invest any extra money elsewhere
This new plan is a system. It takes most decision-making out of the timing of purchases and should help me avoid mistakes like the one I made this week. I may choose to change the system in the future in response to changes in the NISA system or my circumstances, but as long as I have it I expect it will help me stay on track.
In almost any area of life, systems make it easier to do things. If you have a system you don't need to make decisions or expend willpower. They are incredibly powerful.
Do you have any investing systems? Please tell us about them in the comments or in the forum.