How To Be A Successful Investor!

You may think that investing is not for you; maybe you’re not experienced enough, maybe you don’t have enough capital. But, the whole process of investing is not as scary as you think. Follow these simple tips and start investing successfully.

Start Before You’re Ready

This may seem counter-productive, but hear me out. Have you ever refrained from doing something, for fear of the risks? And then the thing you didn’t do, happened, and you regretted it? Hindsight is a fickle friend, so don’t miss an opportunity to start investing. Tackle your fear and start before you’re ready, because, to be honest, you will never be ready; “I’ll wait until next month…Let me do it after I’ve paid my bills…Maybe next year.” Take the plunge! If you don’t, you’ve already missed out on so much time you could have been investing.

Don’t Be Emotional

This point is crucial. You have to take all emotion out of investing, mainly fear and greed. If you see your investment plunging, your first response may be to sell, out of fear of losing even more. If you see stocks going up, you may want to buy before they go up higher, out of greed. Doing this eventually leads to buying high and selling low, losing you money in the long run.

  Instead, take advantage of dollar-cost averaging (the concept of buying the same amount at regular intervals). This method makes your investment almost robotic. Another thing you can do as well, is to make your payments into your investments automatic. Set up GIROs or transfer straight away after you get paid, so that you don’t even think about it.

Plan Situations In Advance

Another great tip is to have a set of ‘rules’ before you invest, so that if X was to happen, you already have a Y. For example, if you have a target buy price of a stock in mind, stick toit and do not deviate. This forward planning also helps you take emotion out of investing and manages your fear and greed.

Use Volatility To Your Advantage

Volatility is inevitable with investments, similar to if you go to a theme park you know there will be rollercoasters. A quality of a true investor is being able to hold onto their investments through times of great volatility. Even though it’s scary when investments go down, it’s not permanent. Stocks do not permanently lose their value. Use times of volatility to define your objectives, focus on what stocks are trending and always remember to be prepared for these situations. It’s all part of the game!

Do Some Homework!

Learn about the world around you; politics, technology, science, all have an effect on the financial world. Read up on current affairs and look out for things that could affect the economy and stock markets. The more you read, the more you will start to see trends in the market. I recommend reading The Economist, Business Insider and Bloomberg.

Know What Kind Of Investor You Want To Be

There are two types of investors; passive or active. Passive investors invest in mutual and index funds. If you’re unsure what these things are, check out my article “Investing Terms You Need To Know”. Passive investors benefit from long-term growing financial markets. Their investments are managed by fund managers, shuffling their money around for them on a regular basis. I would consider myself a passive investor; I leave the experts to do their job and just put my money in these funds over regular intervals. This, along with dollar-cost averaging, helps me remove my emotion from investing.

  An active investor has to be very committed, professional and knowledgeable in what they are doing. If you decide to be an active investor, do your research! Know which stocks you want to invest in and be prepared to keep an eye on them. Try to be robotic about it and apply the previous tips.

Have A Long Time Horizon

I’ve mentioned it before but an investor who holds onto their investments longer, usually benefits the most. While the stock market is often volatile over shorter periods of time, the economy generally grows year by year; the inflation rate in the US in 2010 was 1.64%. In 2021, it is currently 2.21%. While inflation rate is annoying in terms of making things more expensive, it is an indicator that the economy is doing well. A higher inflation rate means more spending, more demand for products and triggers more production to meet the demand.

  This means that if you hold onto your investments for longer, you are avoiding short-term losses and in turn benefitting from the growth of the economy.

To conclude, no one can be the perfect investor (if that was the case we’d all be rich), but if you follow these steps you are more likely to make better choices and become a successful investor!

2 thoughts on “How To Be A Successful Investor!

  1. I really enjoyed your post!

    I have to agree with you on starting before you are ready. Many people put off investing because subconsciously they fear the unknown. In the end they keep pushing back something that is good for them. Which is not necessarily their fault.

    The best time to start anything is yesterday. Putting yourself out of your comfort zone will make you grow. But by saying that, I am not suggesting that people all-in their life savings on a single stock. Start small with index funds and build a solid foundation (passive investing is boring but will grow your wealth). While you’re doing that, research and educate yourself on how to invest/value individual companies. While you’re learning, you’re still able to participate in the growth and also dividend payments.

    Starting earlier as opposed to later will have a substantial difference to your end wealth. Especially if you have a long term horizon.

    Incognito Wealth

    Like

    • Hey there,
      Thank you so much! I’m glad you enjoyed it. Yes I agree, a lot of people are very apprehensive about investing because they don’t know what will happen. However, we know that if we leave our money in the bank it will lose money, so I always advise people to start investing.
      I agree that diversification is sensible, as putting all your eggs in one basket is risky. You mention a good point about passive investing- I’ve done a couple of articles that mention this, particularly my article on how to take the emotion out of investing.

      Glad you enjoyed!
      Danielle

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s