Investing is a critical part of a young professionals life. As you get more stable in your career, investing is something you should be thinking more about and something that you’ll ideally start doing more of. Whether it’s for retirement, or just for the not so immediate future, investing is a great way to build long-term wealth. Of course you are still taking a risk with investing your money, so you have to make sure that you are doing everything you can to protect yourself as much as possible. Here are a few tips for beginner investors or experienced ones!
Leave Your Emotions at the Door
You have to know that having a high IQ doesn’t mean that you are going to be good at making investments. If you want to be a good investor then you have to make sure that you are leaving all of your emotions at the door. You need to also make sure that you avoid investing more than you can afford, as this tends to be the main reason why people get into trouble. You have to make sure that it is your gut that is driving your decisions and not your head. If you can do this, then you will soon find that it is easier than ever for you to come out on top.
I’ve had this happen over and over again, a stock or fund I’m watching goes way up, or way down, and I invest with my emotions instead of my head. I know it’s not a good idea to sell, or that the stock is way too expensive but I still go after it! I’ve been trying to get better at this by carefully vetting my investment decisions before making the trade.
Understand what you’re investing in
It’s very easy for you to get misled by the numbers that you see on the news. When you invest in stocks, you have to know that you are investing in a company and not a number. These company has employees, it sells a product or service, and it makes money. Don’t let picking stocks become some kind of abstract concept. If you buy a stock, then you are part of that company. Warren Buffet famously said once that he prefers to invest in things he understands, and avoid those investments that he doesn’t. Take your time and do your research!
Whether it’s buying stocks, or picking up on the latest trend like crypto currency investing, it’s important to do your homework and understand what the investment does and how you expect it to grow. Remember, you’ll need to pay tax on your investment too, so look into crypto tax forms if you’re choosing to use cryptocurrency.
Plan Ahead
A lot of investors get tempted to change the relationship that they have with their stocks. If you make a decision in the heat of the moment, then this can lead to you experiencing a very dramatic investment mistake. You may find that you end up buying high and then selling low. Journaling will help you out quite a lot here. You need to write down every single stock that you have in your portfolio, while also making sure that your head is nice and clear. Write down why you would like to invest in a company and then write down what would make you want to sell. If you can do this then you will soon find that you can come out on top.
I’ve been doing this for about a year now and it’s been really helpful for me. It helps remind me why I picked a stock, how long I plan to hold it, and my gain or loss. Remembering why I picked a stock and remembering my overall plan helps me avoid knee-jerk reactions when things get a little too heated in the market. Jumping in and out is risky!
Build up your Positions
Time is your superpower. The most successful investors will choose to buy stocks purely because they expect that they are going to be rewarded through things such as share appreciation and dividends. Take your time in buying, and also make sure that you are reducing your total exposure when it comes to price volatility as well. It’s helpful for you to look at the dollar-cost average if possible. This may sound very complicated but at the end of the day, it’s not at all. Dollar-cost averaging is where you invest a certain amount of money at very regular intervals. You can also adopt a schedule when it comes to your investing as well, as this will help you to really capitalise on the benefits.
Investing can be a great long-term wealth builder, but it’s important to invest wisely, cautiously and not erratically!
Disclosure: Some links are affiliate links that earn me a commission.
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