The following is a guest blog post:
Let’s face it: if investing was as simple as it seemed on the surface, just about everyone would be raking in big bucks, right?
However, we all know that finding success via the stock market is much easier said than done. Although becoming an overnight success story certainly isn’t something that newbies should expect, there’s no need to step into the world of investing with a sense of gloom and doom. While it pays to be hopeful, it likewise pays to have realistic expectations.
Finding success as a new investor often requires overcoming some distinct mental hurdles. Whether you’re new to the game or are struggling to see the ROI given your blood, sweat and tears, consider the following checklist as a way to provide yourself with some peace of mind.
Breaking Down the Language Barrier
Risk. Options. Volatility.
The initial days of investing can feel like learning a foreign language, right? Although you might not know what a covered call stock screener is today, the fact remains that you’re expected to master the terminology of investing sooner rather than later.
Perhaps the best way to make it happen is to soak up as much investment knowledge as you possibly can via mentors and the investment blogosphere. Strive to understand a few new terms per day as you get your feet wet: the more you immerse yourself in the world of investing, the easier it is to understand essential terms over time.
The Concept of Risk
Of the various concepts that new investors learn, risk is arguably the most important to understand. While “high risk, high reward” investments may sound enticing, they’re dangerous for newbies who have no idea what they’re doing. There’s a reason why so much time, research and money goes into the act of risk assessment as investors strive for the best ROI possible.
Remember: investing should not be akin to gambling. Newbies should start with the safest stocks possible to ease them into understanding just how difficult the market can be to manage.
Smart Companies Aren’t Always Smart Investments
On a similar note, it may be tempting to throw your money at the latest start-up or app in pursuit of some quick cash; however, the correlation isn’t always there. This is especially true in the case of companies whose stock has risen to such astronomical levels that it’s seemingly impossible to get a decent return. When in doubt, be wary of the hype and instead focus on safe investments.
The Art of Losing
It’s important to accept in the early goings of your investing career that you’ll probably lose a bit of money before you make any decent returns. Making peace with this now will provide you with realistic expectations down the road.
Again, this isn’t about accepting your fate before getting started. There’s a reason why you should start investing with disposable income versus putting your savings account on the line. Similarly, every misstep you take as investor represents a valuable lesson regarding how you should approach future investments.
Don’t let yourself get in over your head if you’re a newbie. Take these mental hurdles head on and think of them as baby steps on your journey toward becoming a better investor.