The 9 Commandments for Average Investors
If you are just getting started in your stock market journey, there are 9 important commandments that you need to keep in mind.
1. Always Think Long-Term
As far as personal investing is concerned, it rarely happens that a sudden move in prices will mean that much. Expect things to balance out unless a catastrophic event occurs. Practice patience.
2. Buy Based on Your Beliefs
Never listen to your friends or to the radio. Listen only to yourself. When you don’t understand or know what you are buying, never buy it. When you don’t understand it, invest only on what you truly and personally believe in.
3. Invest Only What Your Money Can Afford
Although you can sell your investments anytime, it will be much better if you just leave them alone and allow them to grow. Invest only the amount you can afford and reduce the instances where you might have to sell off your investments to pay for necessary expenses. Your goal here is to keep expenses available for several months if ever something happens and the rest can be set aside for investment.
4. Conduct an Intensive Research
You probably love milk tea. However, if you have no idea how the milk tea business works, you can try figuring things out or just avoid investing in it altogether. How profitable is the milk tea business? Is there an innovation there is or is just a fleeting trend?
5. Allot Monthly Contributions
Not a lot of people can time the stock market perfectly. However, you don’t have to worry since you can always use Dollar Cost Averaging to beat it. Make monthly contributions to your investments and you won’t have to worry whether you buy at the bottom or peak of the market. You can expect to win if you stay on the right track.
6. Set and Forget
Since you are not a day trader, you don’t need to do it the same way they do. You are investing for your future and your style should reflect that. The objective here is to automate the process of investment for you to spend time enjoying your money instead of managing it.
7. Be Anxious When People Show Greed
When all people are enjoying their wins, it won’t hurt to be careful. If you or your peers earn lots of money too fast through your investments, act as conservative as you can.
8. Identify and Get Rid of Frivolous Fees
Banks will always try tricking you to pay fees. Always be vigilant and reduce your fees whenever possible. The fees are highest when the stakes are also at their highest. Even a fee of 1% can be significant after some time. Budget as if you are running a business and pay attention to your cash flow.
Anything that can fail will fail. This is why you should always plan and prepare in advance for failure. A diversified investment is your ultimate hack to ride the market. Diversify your investments so you won’t get shut down because of one failure.
Remember these commandments as you enter the world of stock market investing.