10 Tips to Help You Succeed as an Investor
The world of investing can be incredibly rewarding, but it’s also one of the riskiest endeavors that anyone can take. You never know what the market will do next, and if you make one wrong investment, you could lose all of your money – so only invest money that you don’t need to use for at least 10 years. Here are 10 tips to help you succeed as an investor, so you can continue to see growth in your portfolio year after year.
1) Set your goals
Before you begin your investing journey, it’s important to determine exactly what you hope to achieve. If your goals are short-term and aren’t really related (or connected) with each other, then chances are you may find yourself less satisfied than if they were part of a bigger picture or plan.
If you’re setting out on your own, it’s easy to quickly become overwhelmed by all of your options and start making emotional decisions. Identify what it is that you want from your investments and then look for opportunities that will allow you to get there in a well-thought-out manner.
2) Keep in mind that your investment strategy has to be adjusted over time
As your age and financial situation change, so should your investment strategy. When you’re younger, with more time on your hands, aggressive investments might be preferable—the longer you have until retirement, after all, the more time you have for these investments to recover. At other times in life, a more conservative approach is called for.
This is especially true if you have a family that depends on your income. If you’re getting close to retirement, or are in retirement and no longer earning an income, you might want to consider investments with a less aggressive strategy—for example, investing in fixed-income products rather than stocks. It’s important not only to choose your investments wisely but also keep them adjusted for your financial situation.
3) Stay away from hot stocks
The hot stocks of today are too often lukewarm tomorrow. The best way to stay away from these types of situations is through diversification. Diversification means investing in several different kinds of investments—not just stocks, but bonds and other investment vehicles such as commodities and futures. With a well-rounded portfolio, you have less risk overall, because if one asset takes a nosedive it won’t drag down your entire portfolio with it.
4) Don’t change your trading strategy based on other people’s advice
Some investors jump from one strategy to another, never really finding a solid strategy of their own. Successful trading isn’t just about luck or what’s hot right now. It requires discipline and confidence in your own strategies—no matter what other people say. Find a strategy that suits you, stick with it, and stick with it until you master it. Only then should you consider switching strategies (or perhaps using more than one). Don’t invest in anything you don’t understand: When investing, it is important to understand not only how something works but also why it works. Don’t invest in things you don’t understand; if you can’t explain why something will make money for someone else, chances are good that someone else won’t be able to explain why they should invest either. The key is knowing how and when to sell—and knowing when not to buy!
5) Use common sense when it comes to investing
Having common sense is always important, but it’s even more important when it comes to investing. The world of finance is full of pitfalls for those who don’t know what they’re doing, and anyone thinking about entering that space should be sure that their heads are screwed on straight. Always analyze any potential investment from all angles before getting involved. There are a lot of things to consider beyond just how much money you stand to make, so take your time and do your research.
6) Trust yourself
Investing is a topic that often makes people nervous, but it’s important to trust your instincts and do what you feel is right. Just be sure to research any investments you want to make before diving in. Always stay aware of market trends and new opportunities for growth, and remember not all investments go well. If at first you don’t succeed, try again—and learn from your mistakes.
7) Consider all risks involved before investing
Risk is a necessary component of any investment strategy, but it’s important to understand that risk means different things depending on your financial circumstances. If you’re young and don’t have much of a nest egg, for example, riskier investments like stocks may not be for you.
If you’re in your mid-50s, on the other hand, and are looking for a way to build wealth over time, it makes sense to include some riskier investment types in your portfolio. Similarly, if you’re nearing retirement age and want a large number of high-risk investments that can help generate additional income, you may be able to take more risks with part of your portfolio.
8) Invest only what you can afford to lose
One of the most common mistakes investors make is investing more than they can afford to lose. As Warren Buffett said, Never invest in a business you can’t understand. The first rule of investment is don’t lose money. The second rule is don’t forget rule number one! Investing is all about understanding and managing risk. If you’re only willing to put up a small amount for your investments, it will be easier to weather market downturns without taking on too much risk or losing sleep at night.
9) Diversify your portfolio, but also keep it simple
Diversification is essential for every investor, but you don’t need to go overboard. The key to building a successful portfolio is finding a balance between risk and reward. Diversifying into too many different asset classes can cause you to miss out on market trends and expose your portfolio too widely. Find a middle ground that works best for you, then stick with it.
10) Always stick with your investing strategy
No matter how difficult it may be, you must stick with your strategy. It may feel like you’re losing money when your investments aren’t doing well, but remaining consistent with your strategy is what makes investing a successful long-term endeavor. You should understand why you are investing and make sure that your investments fall within those parameters. If they don’t, reevaluate them before it’s too late. The key to being a successful investor is not allowing yourself to get distracted by short-term results. Don’t let emotion dictate your decisions. As Warren Buffett says, Rule No. 1: Never lose money; Rule No. 2: Never forget rule No. 1. This advice couldn’t be more appropriate for investors who are just starting out—or even experienced ones who have hit some bumps in their road of success!