Five Steps to Becoming a Great Investor

Those who’ve never invested in the stock market before are often put off by its innate risks. And they’re not wrong to worry about those risksthe market is always in flux. The adage “change is constant” is particularly true when investing your hard-earned money.

But that doesn’t mean investing isn’t a good ideait’s simply a matter of knowing how to invest.

Here are five steps to help you on your way to becoming a great investor.

1 – SLOW AND STEADY

It’s highly unlikely that a first-time investor will beat the market using a short-term strategy. A computer trading on the stock market is simply too fast, and will almost always outperform novice investorsand often those who are experienced as well.

Computers trading on the stock market, however, lack a human’s ability for patience and long-term vision. Employing a long-term strategy, and investing in safer, well-established assets, and then holding those investments for years, may not yield immediate profits, but it will usually provide a substantial return over time. Mutual funds and exchange-traded funds (ETFs) tend to provide that security.

Of course, the market offers no guarantees. Long-term investing may very well show decreases at certain times. But since the market tends upward overall, a buy-and-hold strategy is your safest bet for eventual (and hopefully inevitable) profit-yielding.

2 – DON’T MICROMANAGE

Trust in your investments. A common tendency is for people to check stock listings far too often, and then to calibrate their portfolio based on week-to-week, or even day-to-day, fluctuations. These fluctuations shouldn’t be cause for alarm.

Staying informed about the companies with which you’re invested is important, mind you. And tracking your investments is not a terrible idea. The key, however, is to not overreact as changes invariably occur.

Checking stocks too often is known to cause over-trading and rash decision-making. Think of fluctuations in price as simply naturally-occurring vibrations in the market—because that’s precisely what they are.

Again, remember: the market trends upwards.

3 – EMOTIONS AND INVESTING DON’T MIX

Successful investing requires rational decision-making based on thorough research, not emotional responses to fluctuational inevitabilities. Inviting emotions into your investment portfolio will ultimately prove unprofitable.

On top of ever-changing prices (which, again, are to be expected), financial news sources have a tendency to overdramatize market situations. “If it bleeds, it leads,” is a common journalistic adage. Remember that the next time some financial pundit warns their audience of impending market doom.

4 – LOW COSTS, HIGH PROFITS

Regardless of your investing style, or the types of assets you purchase, keeping costs at a minimum always helps your overall return. Again, trust your investments by avoiding micromanagement, and don’t interfere with their long-term progress. The vast majority of trading transactions cost money.

Activity equals spendingthat’s how brokerages make their money. Buying and selling, and thereby paying commission trade costs, not only diminishes your current capital but affects your overall return.

5 – STAY PUT

When the market’s down, novice investors panic and feel the urge to jump out. Conversely, when things are good, they want to jump right back in.

If you’re in, it’s best to stay in. As investing tycoon Warren Buffet said, “The rearview mirror is always clearer than the windshield.”

Sudden drops today aren’t indicators of a perpetual downslide. Stick to your guns, and your stocks will slowly shoot upwards.

Featured Image: Depositphotos/© DragonImages

About the author: Josh is currently studying for a Bachelors in Business Management Organizational Studies at Western University, Ontario. He was awarded the Western Continuing Admission Scholarship in 2015. He is scheduled to graduate in 2109. Josh has worked as a business analyst, co-founded Master Badminton, a sporting goods website, and has written financial analysis, stock market updates, and informational articles on investing.