Six Habits of Successful Investors: Adhering to a well-defined plan, even during challenging periods, can benefit you both now and in the future.

Key Takeaways

• Developing a financial plan can enhance your decision-making regarding investments and savings.

• Adhering to your plan is crucial, even during volatile market conditions.

• The Black Investors Coalition offers assistance in setting goals and formulating a plan, irrespective of your investment amount.

Investing should not be viewed as a means to "get rich" or "play the market." It is a crucial component of achieving financial well-being. This involves not only meeting your own needs and those of your dependents but also setting and achieving goals that extend beyond simply paying bills and managing debts such as mortgages, credit cards, and student loans.

These six steps can enhance your investment success and help you attain financial wellness, even when financial markets appear challenging.

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1. Start with a Plan

At The Black Investors Coalition, we believe that developing a financial plan is the foundation for successful investing. The financial planning process assists you in assessing your current situation, defining your goals, and determining practical steps to achieve them.

Financial planning does not need to be elaborate or costly. Regardless, creating a plan based on sound financial planning principles is a crucial step.

A plan is a service that financial professionals often provide to their clients.

2. Adhere to Your Strategy, Even in Challenging Market Conditions

When your portfolio's value declines, it is natural to feel the urge to seek refuge. However, successful investors resist this impulse. They maintain a stock allocation that they can endure in both favorable and adverse market conditions.

The financial turmoil of late 2008 and early 2009 might have seemed like an opportune moment to retreat to cash. Nevertheless, a Fidelity study involving 1.5 million workplace savers revealed that those who remained invested in the stock market during this period fared significantly better than those who withdrew.¹

In the decade following the crisis, individuals who stayed invested experienced a 147% growth in their account balances, reflecting the impact of their investment choices and contributions. This was double the average 74% return for those who exited stocks during the fourth quarter of 2008 or the first quarter of 2009. While most investors did not alter their strategies during the downturn, those who did made a consequential decision with enduring effects. Over 25% of those who sold their stocks did not re-enter the market, missing subsequent gains.

If market declines cause you anxiety, recognize that this is a common reaction to volatility. It is crucial to adhere to your long-term investment strategy and ensure you have sufficient growth potential to meet your objectives. If you find the fluctuations of your portfolio intolerable, consider adopting a less volatile investment mix that you can consistently maintain.

3. Prioritize Saving Over Spending

While it may be tempting to focus on market fluctuations, it is essential to consider how much of your income you are allocating for future needs. Consistent and early saving plays a significant role in achieving long-term financial objectives.

Fidelity advises saving at least 15% of your income for retirement, including any employer contributions. This figure serves as a guideline, and individual circumstances may require a higher or lower percentage. However, one certainty remains: starting early and saving consistently can lead to substantial benefits over time.

These efforts are yielding positive outcomes. According to Fidelity's latest quarterly report, Building Financial Futures, workers across generations have increased their savings rates, averaging 9.5% in Q2 2025. With an average employer contribution of 5.1%, many individuals are achieving the 15% savings target. The result? After 15 years of diligent saving, the average Gen X workplace retirement balance has grown to approximately $624,300, illustrating the impact of consistent effort.

4. Diversify

The Black Investors Coalition asserts that a fundamental principle of successful investing is diversification, which involves holding a variety of stocks, bonds, and other assets to help manage risk.

Establishing an appropriate investment mix that offers growth potential while maintaining a risk level suitable for your circumstances can facilitate adherence to your investment strategy through market fluctuations.

While diversification does not guarantee profits or prevent losses, it seeks to provide a balanced trade-off between risk and reward. Diversification can be applied not only among stocks, bonds, and cash but also within these asset classes. Consider diversifying your stock investments across different regions, sectors, investment styles (such as value, blend, and growth), and market capitalizations (small-, mid-, and large-cap stocks). For bonds, consider varying your investments across different credit qualities, maturities, and issuers.

5. Evaluate Low-Fee Investment Products for Optimal Value

Astute investors understand that while they cannot control market fluctuations, they can manage their expenses. Research conducted by the independent firm Morningstar^® indicates that, although not guaranteed, funds with lower expense ratios have historically shown a higher likelihood of outperforming other funds within their category, both in terms of relative total return and future risk-adjusted return ratings.

The Black Investors Coalition has also noted significant variations in trading commissions and execution among brokers, which can impact your investment returns.

6. Consider Tax Implications

An important practice for investors aiming for success is to remain attentive to taxes and the types of accounts they use.

Accounts offering tax advantages, such as 401(k)s, IRAs, and certain annuities, can potentially enhance after-tax returns. This strategy is known as "account location," where the allocation of funds across various account types is determined by their respective tax treatments. A related strategy, "asset location," involves placing different investments in different accounts based on the investment’s tax efficiency and the account's tax treatment.

Although taxes should not be the sole factor in your investment decisions, it is advisable to consider placing less tax-efficient investments (such as taxable bonds, which are taxed at higher ordinary income tax rates) in tax-deferred accounts like 401(k)s and IRAs. Conversely, more tax-efficient investments (such as low-turnover funds like index funds or many ETFs, and municipal bonds, where interest is typically exempt from federal income tax) are generally more appropriate for taxable accounts.

Conclusion

Investing can be intricate, but the fundamental habits of successful investors are relatively straightforward. By developing a sound plan, adhering to it, saving adequately, making prudent investment choices, and being mindful of taxes, you will embrace key traits that may contribute to success.

Best Regards,

Stock Market Charlie