How your money mindset (co)determines how you invest

November 17, 2023  |  Scalable Capital
Your money mindset is an inner compass shaped by your beliefs, norms, and values. Learn how to adapt it for financial success.

When we think about investing, we usually think about market trends, financial analysis and investment strategies. But there is another crucial element that is often overlooked: your money mindset. This inner compass, shaped by your beliefs and (money) norms and values, plays a significant role in the choices you make when investing.

What exactly do we mean by our money mindset?

Before we delve deeper into the impact of your money mindset on your investment behaviour, it is important to understand what we mean by this term. Our money mindset encompasses the way we think and feel about money. It is rooted in your life experiences, your upbringing and your personal (money) beliefs. It influences not only how you earn and spend money, but also how you invest it.

The influence of our money mindset on how we invest

The most important thing is to be aware of your own attitude towards money to make strategic investment choices. Why? Because it can affect various aspects of your investment decisions, for example:

Risk aversion versus risk tolerance

Imagine you grew up in a family where financial security always came first. You were taught to avoid risk and save money for the future. This mindset may result in a preference for conservative investments, even if you are likely to get bigger returns by investing in riskier assets.

Seizing opportunities with a growth mindset

On the other hand, if you were raised in an environment where investing and entrepreneurship were encouraged, you may have developed an attitude open to risk and opportunity. This can lead to more aggressive investment strategies, bringing both benefits and risks.

Balanced risk and reward mindset

People with a more balanced money mindset might seek a balance between risk taking and reaping rewards. They understand that investments carry risk, but they do their best to control them as much as possible by doing thorough research, diversification and active monitoring of their portfolio.

Remember, none of these mentalities are inherently right or wrong. They simply reflect your personal beliefs and experiences. The important thing is to be aware of your own money mindset and understand how it can influence your investment decisions in your personal finances. Curious about the mindset of the 10 grandmasters of the stock market and how they invest? Read it in this blog article.

How can we change our money mindset?

If you are aware of your current mindset and want to change it to improve your investment results, here are some steps you can take:

Step 1: Create awareness of your money mindset

It all starts with awareness. Take time to examine your own beliefs and attitudes towards money. What (money) beliefs have hindered you in the past? What (money) beliefs have helped you? Identify and acknowledge them.

Step 2: Determine how you want your money mindset to work in your favour

Set goals for yourself. What do you want to achieve with your money? Do you want financial freedom, retirement planning, or just a stable return? By setting clear goals, you can focus your mindset on what really matters to you.

Step 3: Turn it into actions when it comes to investing

In the end, of course, it is not only the mindset that matters, but also the actions you take. For instance, learn about stocks, bonds, different investment strategies, risk and money management and diversification. New information might influence how you feel about money. Ultimately, apply your new knowledge in your investment decisions.

Whether you want to increase your risk tolerance or just want more stability in your portfolio, understanding and adjusting your money mindset can be a very important step towards financial success. By creating awareness, you can make more strategic and thoughtful choices when investing.

Want more insights and guidance on investing and money management? Then check out our website!

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Author Scalable Capital
Scalable Capital
Broker with flat rate
Scalable Capital is a leading fintech in Europe that brings people and technology-based investing together. Scalable Capital offers a broker with a trading flat rate that enables customers to trade shares, ETFs, cryptocurrencies and funds themselves and to conclude savings plans.