Investing is not for everyone, and that’s okay. But in case you’re wondering if it’s for you, let’s make sure you’ve got the basics: the terminology, the right frame of mind, and the right expectations. That way, you’ll be able to do more than just start investing – you’ll also be able to watch your net worth grow.
Are you ready? Then let’s start with the four golden rules of investing.
While you’ll also need to know a few definitions, that’s not the main focus today. Today, we’re going to make sure you’ve got the right mental framework to be a successful investor. I also want to give the quick disclaimer that while I’m not currently licensed as a financial adviser, I was one for years. And thankfully, this foundational information isn’t something that changes.
The first golden rule is that when the market is down, don’t sell. Instead, that’s when you buy! Let’s put it into terms that are a lot more fun – shopping at Nordstrom. When something is marked down, or on sale, what do you want to do with it? That’s when we buy, my friend! The investment world isn’t much different. When things are on sale, or “down”, that’s when we buy. It isn’t when we sell, or we won’t see the great profits.
The second golden rule of investing is to sell when the market is high. Going back to our Nordstrom example, let’s imagine a seasonal item at Nordstrom. Let’s say it’s something that they carry every year for a few months. And you take a look at the price – and whoa. It’s definitely NOT on sale. Now isn’t when we buy it – now is when we sell it (if we have it, anyway!). And the best way to know if something is at a high is to watch the 52-week top average price. Don’t buy at the peak. That’s when you sell.
Until you’re more secure in your investment capabilities, I recommend that you hold for the longterm. In fact, I recommend that you hold it for at least a year. That’s because day trading is ruthless – to you. It’s hard, it’s stressful, and it’s time consuming. So if you don’t want to deal with that, don’t feel bad. Day trading is rough – and it’s not for everyone. In fact, it’s not a lot of people – and there’s a good deal of burnout for those who work in the industry. So hold onto those investments – and don’t worry about day trading. It really isn’t for the faint of heart – or even those who aren’t 100% committed to it. And that’s okay. That leave us with one final golden rule of investing.
The last golden rule is to not be a control freak. Have you ever followed the stock markets on a day-to-day basis? If you haven’t, don’t. Because it can be stressful! Quick analogy – it’s like your weight. Your weight very naturally fluctuates from day to day. That’s why you don’t weigh yourself every day – you’d go crazy worrying about a few ounces that might not be there tomorrow! The stock market is the same way. Daily fluctuations are very normal. So if you can’t let go of that need to control something that’s not controllable, I recommend that you just don’t look at the daily market fluctuations.
Don’t be a control freak. Otherwise, you’re going to have a panic attack, because it can’t be controlled. There you have it – the four golden rules of investing. Don’t sell when the market is down. Sell when the market is high. Day trading isn’t for the faint of heart. And don’t be a control freak. Knowing all of this will give you a good beginner’s foundation so that you’re ready to start investing.