It hurts when I hear about people losing massive amounts of money in the stock market. This is especially true when people lose that money by violating some of the basic principles of investing. If you’ve been investing for years, you probably won’t get much out of this post. But if you’re new to investing, please be sure that you take heed.
8 Investing Tips You Should Know Before Investing Your Money
1. Investing works best when you set it and forget it. It will likely provide better returns, but it will almost certainly provide emotional peace. Imagine this. At 9 a.m., someone checks the value of their portfolio. They do it again at 11 a.m., 2 p.m., and 4 pm. What did they get for checking up on the status of their investments? Nothing.
2. Education and experience can’t predict what the market will do. I made this mistake when I started investing. I figured that my financial advisor was some type of guru that had been taught how to predict what the market will do. For the first several years of investing, I decided what to invest in based on a person’s recommendation because I trusted he knew what he was doing. It’s not a bad idea to get help, but you must realize that their advice is fallible.
3. Unrealized is an important term. In the investment world, people talk about unrealized gains and losses. A person might say they’ve lost $5,000 in the market. But, if that money is still in the market, guess how much you’ve lost? 0! The loss does not occur until you remove the money from the investment. Too often, people pull money out of the market when it’s down because they’ve ‘lost so much money.’ Sometimes waiting out the market is the best approach. I’ve had times when I’ve said to myself that I’ve made x on a certain investment. That would be true if I took the money out. It’s not over until you sell. The only way to guarantee a loss is by selling your holdings.
4. Be your own professor, and get an investing degree. There has probably never been a time in history when so many people had access to so much information. You shouldn’t do anything without first learning something about that topic. Personally, I recommend the Sound Mind Investing Handbook. It provides a good overview of what is happening when you invest. You won’t know everything, but you will know something.
5. There is almost more that you can’t predict when investing that you can. I’ve stopped obsessing about what I’ll have in the future (because retirement is a long way off, if ever). There is more about the future that is unknown than known. Act responsibly with what you’ve been entrusted, and invest in an investment vehicle that has a high degree of success. That’s all you can do.
6. Ignore stock market analysts. News is entertainment. Do you think a guy who says he has no idea what the market is going to do is going to be on TV? What about the guy who predicts the stock of company Y will double in the next three months? People don’t get on TV because they have the best advice, but because they are the most entertaining.
7. Start Early. The sooner you start investing, the better off you’ll be in the future. It’s as simple as that.
8. Pay attention to fees. Don’t make your investing decisions solely on fees, but be aware of them. When I started investing, it took me a long time to realize that I paid a front end fee of 5% and that was really cutting into my investment potential. Different online brokers charge different fees. You’ll want to discover the best online broker according to your needs.
9. Don’t put your trust or hope in your investment. You are not the sum of what you’ve invested. Your security is not in those dollars. Keep God first. You do this by being rich towards God in the midst of your investing.