Don’t Dip Into Your Investments
The more money you save and invest, the richer you’ll feel. Although no one ever really feels “rich”, knowing that you have money often tempts people to spend more, and can slowly change your spending habits over time. Proof of this phenomenon can be seen by looking at how the economy acts in a recession. Even people whose jobs haven’t changed reduce their spending because of changes in their investment portfolio and because of reductions in their home value. Even though nothing has changed with their income, they feel poorer and usually spend less.
It is this wealth effect that can change spending habits. If you want to stay on the right investing path, keep your spending under control, and try to avoid withdrawing any money from your investment portfolio. Now that you’ve developed the discipline to save and invest, don’t make rash decisions to dip into your investments to pay for things you don’t need. Even if you need them, try to find a way to fund them elsewhere. It is extremely important that you give the money in your account all the time it needs to grow and grow before withdrawing it.
The exception to this rule is when you withdraw money from your investments to invest in something else. For example, if you want to invest in real estate and need money for a down payment, it isn’t a bad idea to take that money from your investment account. After all, real estate is an investment and the move will help diversify your risks.
In summary, withdrawing from your investment portfolio during good times can lead to subpar returns over the long term. It is an important concept to stay disciplined and give your investments all the help they need to continue their long term growth.
Related posts:
