Investing can be a lot of things. It can be a hobby, habit or just a way to save up for retirement. What ever the case may be for you, there are some investing facts that you should not forget. Let’s get right into it.
1. Investing takes time
In order to succeed in the world of investing, you must have a long enough time horizon. You won’t get rich overnight by investing. Investing is like a marathon; it is a long way, but in the end, it is worth it.
To be a successful investor, you have to be in it for the long term. You can do this easily by making it a habit or a hobby. Invest a certain amount of your salary every month without exceptions.
2. Don’t try to time the market
The second fact is that you should not try to time the market as a long-term investor. Making an investing plan and sticking to it is a much more bulletproof strategy than trying to time the market.
By timing the market, I mean trying to predict the exact lows and highs of the market. If you sell too soon, you might be missing out on a lot of profit. On the other hand, trying to predict the exact bottom can be as difficult as well.
By buying regularly, you will reduce the risk that timing puts into your investing. No matter what is happening in the market, stick to your plan. There are so many different factors that are affecting prices that it is close to impossible to predict them all.
3. If a stock seems cheap, it may not be true
Most of the time, if an individual stock is on a down trend, meaning it has lost a significant amount of its value, it might seem cheap. However, there are typically reasons behind that fall.
There are numerous reasons the stock might be falling. That might be a new law that makes it harder for the company to be profitable. It might be changing world situation, what ever that is, there is a reason behind everything.
It might be just because some big player sold its position. There might be nothing wrong with the company, but make sure you do your research before you try to buy cheap stocks. They can be referred to as falling knifes.
4. There is always a risk involved
What ever you are investing in, there is always a risk. You can manage the risks by diversifying and doing your research well, before putting your money at risk.
The higher the return you expect, the higher the risk usually is. I say usually, because sometimes you might get a good opportunity that offers some good returns, with less risk than usual.
Try to find opportunities with a good risk-to-reward ratio. You can reduce your risks as well with a good investment strategy as well as diversification like I mentioned before.
5. If it seems too good to be true, it probably is
If you are promised 1000% weekly returns on your investment, you might want to stay away from that unless you know exactly what that is and it is legit. I would say it probably is not.
With NFT:s and cryptos, there are a lot more rug pulls and scams out there than before. They are unregulated, so pretty much anyone can make their own “project” market it as an invention and pull the rug below your feet.
6. You don’t have to know everything about everything
You don’t have to know what the sales of every company on the US stock exchange were between 2010 and 2022. You don’t have to know really anything in order to start investing. However, knowing the basic principles of investing will help you understand where your money is going.
If you invest in already diversified funds, you really don’t have to know so much about what individual companies do. This is a very beginner-friendly way to start your investing journey and continue from there if you are interested in diving deeper into the world of investing.
So how does investing work at the most basic level? In short, you buy partial ownership of the business. Therefore, you carry the risk with the money you invested and the part of the profit the business makes therefore belongs to you.
7. You don’t have to monitor your investments
If your goal with investing is to build wealth for retirement, there is no reason you should monitor your investments daily. Or even weekly or monthly, unless you want to.
It can be fun and intimidating at the same time to watch how your investments perform; however, it is not necessary. With just a basic buy & hold strategy, you can get really far based on past data.
Sometimes it is even better not to watch your holdings, when the market is going through a rough time. Chances of you panic selling will reduce if you don’t even watch how your investments perform.
Often, when markets are performing poorly, it is best to do nothing special and stick to your investing plan.
Final words
These are some facts about investing that hopefully will help you towards in your investing journey. If you are interested, there are other investing-related posts on my site as well, you can find them here.
Investing is a good way to build your wealth towards a million dollars. However, there are other ways as well. I have a post about 3 ways anyone can make a million dollars. You can read it here.
Hopefully this was helpful to you, have a nice day.
This is not investing or financial advice. Past returns are not a guarantee of future returns. Always do your research before risking your hard-earned money.