Top 7 Investing Tips That'll Make You A Better Investor
The pandemic was/continues to effect many people around the world.
What it actually did though was introduce a new group of new investors to begin investing in stocks. Many people were stuck in their homes with nothing much to do but play video games, TV binge watching, and taking a shot at buying stocks at discounted prices as they got hammered.
So, as this new generation of investors emerge, as well as their more experienced counterparts, here are the top seven investing tips that’ll make you a better investor.
Stock Tip #1: Stop Watching the Markets
Many times I tell my clients to turn off their television sets and stop watching the business market news.
Yes, it’s normal to keep an eye out on what’s happening in the economy, but it is easy to get swept up in the excitement or doom and gloom of it all.
As the stock markets are constantly moving up, down, and sideways, it may lead you to continuously check or change your investments when you may be better off leave things alone.
It’s best for investors to avoid tracking their performances (both good and bad) too frequently. In fact, investing should be boring. Meaning they should be purchased and held for a long period of time.
Stock Tip #2: Be Careful of Chasing Trends
Whether people participated in the madness of these so-called meme stocks such as: GameStop and AMC Entertainment, or investing in Dogecoin and other cryptocurrencies, you need to be careful.
There was so much talk on social media platforms about what’s the next “hot” stock but many investors not knowing why they are choosing a particular investment. A lot of it had to do with FOMO (fear-of-missing-out).
What most people should be doing instead of chasing trends is to invest passively in the markets through index funds or ETFs (exchange-traded-funds). This gives you the opportunity to take on less risk because of diversification and hopefully watch your portfolio grow over time.
Stock Tip #3: Don’t Believe Everything You Read on Social Media
As I mentioned above, there is so much false information floating out there on social media with regards to investing and finances.
The overall guidance from experts is simple: “Don’t take investment advice from those who don’t know your personal financial situation. Everyone has different goals, so all of the situations are completely different.
You may feel pressured by someone on social media convincing that you can get rich if you start investing in a certain company or investing in options. Instead, do your own research or work with a professional financial advisor who like and trust.
Stock Tip #4: Give Your Investments Time to Grow
When it comes to investing, time is of utmost importance. Your objective is to hold your investments for a long as you can to maximize your returns.
I don’t how many times I’ve taken profits on my investments too soon but later learned that if I had held them a bit longer, I would had made much more.
In this microwave society, it has carried over to the investment world as well. Investors bail out on investments because they do not double their money in a certain period of time, which is usually days or weeks.
The stock markets aren’t casino’s but I see a lot of new investors going in as traders than investors. There is a huge difference.
Stock Tip #5: Investing Money You’ll Soon Need
The stock market can be quite volatile, so people jumping in to invest before building a strong savings or financial foundation are making a big mistake.
Prior to investing, you should build a cash reserve so you don’t need to rely on your investments when you run into an emergency or want to make a certain purchase.
You would be dishearten if you lost money you were saving for - like a down payment on a home - but instead placed that money on a big bet in a tech stock from the suggestion of that social media guy.
A good way to tell if you’re ready to invest is knowing you have a healthy amount of cash in a savings account to cover your near-term goals. Money needed within a relatively short time period, such as a few years, should not be invested in stocks.
Stock Tip #6: Having Clear Investing Goals
One of the biggest mistakes investors make is confusing investing with stock picking. To be true to the terms, investing must start with a specific goal corresponding to a set time horizon.
The goal itself could be anything: buying a new car in two years; purchasing your first home in five years; or retiring in 40 years. Once you’ve identified a goal, an investment plan can take shape.
There is no magic stock-picking formula that will make your most ambitious desires a cake walk. In fact, while stock selection is important, research shows that what matters most in investing success is asset allocation.
What I’m trying to say here is that when you have a goal in mind, your time horizon and risk tolerance will inform these decisions. Setting up your investment portfolio in the context of a realistic plan can be adjusted for life and market uncertainties should put you well on your way to achieving your financial objectives.
Stock Tip #7: Never, Ever, Delay Investing Altogether
Choosing to never invest at all is a costly mistake. The sooner you start, the more you will have in the future. There should be a countless number of 401(k) millionaire retirees who’ve worked 25-30 years in their fields.
Investing early is the clearest path for becoming a millionaire.
Some people are so scared of investing that they never even begin and lose out on the amazing compound effect that can happen over the long term.
The biggest risk is not investing at all.