Not following through on your investment goals? – Here’s why

Why do many of us fall short after setting our investment goals?

Or perhaps I should say why so many of us fail to follow through on our investment goals.

I hear a lot of my friends and families not investing sufficiently to make their money work hard for them.

The common reasons are usually associated with the lack of knowledge, interest and/or time.

But these are very generic brush-offs that we use in many areas of our life. Yet, investing is too important a subject for us to neglect them altogether.

So, my purpose for today’s post is to help you better understand our own psychology when it comes to investing. Or in fact, in any other goals of our lives as well.

Disclaimer, I’m not a psychologist or any of that sort. But just someone who has keen interest in knowing how our motivation and results gel together. Because, I have personally experienced falling short of my investment and business goals as well. In fact, I am always struggling to close the gap, everyday. So this is me researching to better understand myself and track my own progress in the investing and entrepreneurial pursuits. And I hope it can benefit you as well.

So, let’s jump in!

The Reality of Investment Goals Setting and Working On It

Investment goals plan

When we first embark on our investment journey, we are motivated to attain certain financial targets. For example, we yearn to generate a 20% annual return. Or attain a certain absolute amount after X number of years.

However, a recent study shows that there is a disconnect between what we focus on before we start to pursue a goal and what we focus on after we have begun. This is the key reason why many fall short of their goals.

The experiment centered around testing decision-making between two crucial stages. Choice (i.e. action selection) and Execution (i.e. action execution involving actual effort exertion).

The Effort-Reward Disconnect

What the researchers found out is that during the Choice stage, participants’ focus is on the reward. Hence, this propels them to pursue higher rewards. This is even though they recognize that they will require proportionately more effort to attain these higher rewards.

However, participants’ focus shifts to the effort once the work starts during the Execution stage, when they are faced with what’s really required to achieve the goal. So, rather than propelling us to work harder, higher rewards that require greater amounts of effort actually cause us to stay focused on the effort instead. Thus, resulting in a higher chance of failing to reach the goal.

According to the study, the problem is that we fail to refocus on the reward once the work starts. Yet, this is necessary to keep our effort in check as the means to our desired result.

Investment goals give up

Dr. Mafda Osman, professor in experimental psychology at Queen Mary University, added that “when we face the reality of our choices, we realize the effort is too much and give up.”

So, I think this phenomenon definitely applies to our investment goals. When we just start off, we are excited to generate high double digit growths for our portfolio. Or even envision ourselves retiring early.

But when we actually start pursuing our goals, we realized that it takes so much time and effort. We will need to research pages after pages of financial reports. Or to stay updated with the latest news of companies that we are interested to invest in.

Hence, this resulted in many of us giving up on finding great investment opportunities that can multiply our wealth more substantially in the long run.

Striking A Balance

But don’t beat yourself up first. We are humans with many priorities. Often, we have to deal with so many things all a the same time, especially in today’s highly connected world. We also have many interests. And I understand that most of the time they are not in the areas of business and investing (so I am the abnormal one :p). These just make it ever more challenging to attain our investment goals.

Then again, it is important to conduct critical self-analysis from time to time. Ask ourselves whether we are taking enough responsibility in important goals such as investing. Perhaps, we are influenced to want results fast. So we focus on the short term results that is in direct conflict with achieving substantial rewards in the long run

So where should we begin?

How To Set Better Investment Goals

Investment goals quotes


Well, the research we discussed earlier does propose some ways to help us better achieve our goals.

First, set more realistic goals by recognizing the effort required to achieve them, no matter how tempted we are to set goals of higher rewards. Second, remind yourself to refocus back on the reward once you start the pursuit. This will help you to keep your effort in check constantly.

Lastly, I want to add my own suggestion, which is to align your investment target with other goals that you have. Because, conflicting goals are the invisible forces that can tear you up slowly over time.

Imagine setting a plan to research investment opportunities after work everyday to achieve certain financial goals. On the other hand, you may have other goals such as to maintain a loving relationship with your family. So, you would possibly want to spend more time in the evening with your loved ones as well. Or perhaps, even maintain a healthy lifestyle by exercising everyday.


These conflicting goals can generate unnecessary stress if you set them in an unrealistic manner. To overcome them, be creative. Perhaps it could be combining exercising and bonding with your family together. Or it could be scheduling your investment research work with spending time to play with your kids on alternate nights.

Most importantly, start right away. Even if it’s just half-an hour every week. It’s better than putting off your investment goals indefinitely. Don’t worry, you can always adjust along the way.

You could even realize that you are just not interested in doing individual stock picking at all. Perhaps investing in a fund may be more suitable for you. Or perhaps you may feel more comfortable investing in real estate.

Conclusion

Investment philosophy

There is no right or wrong answer. Find the investment philosophies or strategies that you feel good about.

I’m still trying to figure out the optimal way to balance my investing and entrepreneurial pursuits as well.

Anyway, there’s a myriad of factors that can affect our investment journey. This effort-reward disconnect is just one of the psychological aspects that I want to bring to your attention today, in case you are beating yourself up on not following through on your investment plan.

Hope that it will encourage you to kick start your pursuit on your investment goals. Or if you are already in the middle of it, I want to let you know that we are all in this together, and it’s part of the fun, so keep going!

Share with us your goals and struggles in the comment below, and let’s motivate each other to reach our investment goals. 🙂

Remember to subscribe to our newsletter below, so that you can be informed once our next investing tip is out.

Keep learning and happy investing!

Related Articles

Responses

Your email address will not be published. Required fields are marked *