Are you just starting your investment journey? There’s so much you can learn from people who have spent decades investing in the markets. We talked to six of them for you. As they reflect on their experiences, these seasoned investors share the lessons they believe are essential for beginners.
1. Keep It Simple
Robert, a university professor and a Chartered Financial Analyst charterholder, has invested throughout most of his career. His advice to newbies: Keep everything as simple as possible.
Robert’s Story
Years Investing: 40+
Occupation: Finance Professor, Ph.D
Too often, investors watch the 24/7 financial news networks and have a bias toward action—that is, trading. Trying to pick winners, for the most part, is a loser's game.
Especially when you’re starting out, it’s easy to keep fiddling with your choices based on current events. But make an effort to avoid knee-jerk reactions based on the latest news or the daily moves of the market.
Where you can, consider automating investments instead of managing purchases on your own. That can help prevent the emotions of the moment from affecting your decisions. Take it from an investor with decades in the market; simplicity is key.
2. Weigh Your Risk Tolerance
Some people love skydiving out of planes. Others want nothing to do with chasing risk. In investing, it’s important to figure out just where you fall on this spectrum, explains Link , a real estate agent who’s been investing since high school.
Link’s Story
Years Investing: 30
Occupation: Real Estate Agent
“For a long time, I was attracted to investing in individual growth stocks, but I could never stomach the volatility that came with them,” says Link.
It took me a very long time to come to terms with the fact that I needed to seek investments with less volatility.
If you’re still figuring out your comfort level with risk, work with a financial planner to understand what kind of risk profile will help you sleep soundly at night. If a volatile or risky investment brings you anxiety, it might not be the right fit.
At the end of the day, it’s important to listen to your gut, according to Link. “No one will be invested in your finances as much as you!”
3. Forget About Your “Fear of Missing Out”
Financial blogger Kyle has been investing since the age of 18. With nearly two decades in the market, he says one thing has become clear. “You will miss opportunities, but another is always around the corner," says Kyle. Market sell-offs happen, but solid companies usually bounce back.“
Kyle’s Story
Years Investing: 19
Occupation: Financial Blogger
The greatest losses I've seen in my 19 years in the market have been when I have acted against my convictions.
No one can predict market movements perfectly. That’s why understanding personal risk and timing is important. With a long enough time horizon, you have the potential to recover from losses.
4. Have a Goal in Mind
Starting isn’t the only thing. It’s hard to keep running without a finish line in mind. Investing isn’t too different, according to Sandy Yong, award-winning author of “The Money Master.”
Sandy’s Story
Years Investing: 12
Occupation: Author, Investor, Speaker
“Take some time to write down your financial goals," says Sandy. "What things do you want to achieve and by what time frame? Are you saving up for a down payment on a house? Or are you saving for your children's education? Maybe you want to retire early and have a sound nest egg.”
Your financial goal and how much time you have to work toward it will help you determine how much money you'll need to save and invest in the stock market and what returns you'll be looking for.
With an investment goal in mind, your strategy will have direction and your goals can help guide you to make sound choices along the way.
5. Forget About Fads
Investing in popular or buzzy stocks can be fun, but there’s no guarantee a fad will pay off, says Patrick, the founder and CEO of a sewing and quilting supply company.
Patrick’s Story
Years Investing: 10
Occupation: Business Owner
“My advice to new, inexperienced investors is to avoid investment trends/fads, especially if you do not understand how the underlying asset works or how it generates value for investors,” advises Patrick. “Only invest in assets that you have a thorough understanding of and that have a clear, transparent path of generating the returns that you are seeking.”
Going with what's hot at the moment exposes your capital to significant volatility. If you're not careful, you may lose the entirety of your investment.
If something sounds exciting, do some research before investing. It’s a good idea to get a sense of the industry the company works and to read through the company’s financials. You want to understand why this stock might be a good idea and what could derail its progress. You also may want to consult an investment advisor or other financial professional.
6. There’s No Better Time to Start
Are you waiting for the perfect time to begin investing? There’s no time like the present, says Alex, head of marketing at a software company.
Alex’s Story
Years Investing: 15
Occupation: Chief Marketing Officer
“Too many would-be investors spend all of their time waiting for the perfect time to enter the market, which naturally leads to perpetual cold feet,” says Alex.
The number one tip is just to start now.
Starting an investment journey can feel scary. Take these lessons from experienced investors and begin investing today.
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Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.