New Investors: Do not be in too much of a hurry or you may lose money


Years ago, when I bought one of my first shares, its share price dropped a few days later. As a beginning investor, I was excited, so I dismantled these stocks in an attempt to minimize my losses. A few days later they went back to the price I bought them. A day later they went up even more.

It’s easy to laugh at my reckless decision and my obvious mistake now. Fortunately, I did not incur a particularly large loss at the time by hastily selling. But it taught me a very important lesson: not to let panic or other emotions interfere with my investment decisions.

In fact, succumbing to emotions is one of the leading ways in which you can lose money in the stock market. If in the past you have been a victim of emotionally driven investments, here are some strategies to use.

1. Take the buy and hold approach

When you think of investing in the stock market as a long-term game, you will be less likely to get carried away by individual events along the way. The stock market has a strong history of recovery from losses. If you take a buy-hold approach – load up on quality inventory now and get stuck in it for decades – you are less likely to get burned. You are less likely to panic every time your portfolio value drops.

Use the average cost of dollars to your advantage

Many people worry about losing money on stocks and therefore hesitate to buy at certain times, such as when stock values ​​rise or when there is a recession. Therefore a better bet is a commitment to buy shares at regular intervals, regardless of the circumstances at hand.

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This is a strategy known as the average cost of dollars and it helps investors avoid falling into the abusive rabbit guy of trying to time the market. With an average cost of dollars, you can say you put $ 100 into the stock market every week. You could even be more specific and say you buy a particular stock worth $ 100. Average dollar costs have been shown to help investors pay a lower average price than scheduled purchases, which is a simple way to get emotions out of the equation. You can set up your brokerage account according to an average dollar cost strategy, or sign up for your employer’s 401 (k) plan and deduct funds regularly from your paycheck.

3. Diversity

Having a wide range of investments can give you peace of mind during periods of stock market volatility and reduce the likelihood of you acting irrationally. You can diversify by buying stocks from different market segments or by loading index funds. With index funds, your portfolio will not exceed the wider market, but will benefit from an overall rise in the market. Index funds also allow you to diversify instantly so that you do not have to spend time researching individual stocks or worrying about choosing by mistake.

Most of us can not just flip a switch and turn off our emotions, but there are steps you can take to become a less emotional investor. It can, in turn, save you a world of losses over the course of your life.

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Years ago, when I bought one of my first shares, its share price dropped a few days later. As a beginning investor, I was excited, so I dismantled these stocks in an attempt to minimize my losses. A few days later they went back to the price I bought them. A day later they went up even more.

It’s easy to laugh at my reckless decision and my obvious mistake now. Fortunately, I did not incur a particularly large loss at the time by hastily selling. But it taught me a very important lesson: not to let panic or other emotions interfere with my investment decisions.

In fact, succumbing to emotions is one of the leading ways in which you can lose money in the stock market. If in the past you have been a victim of emotionally driven investments, here are some strategies to use.

1. Take the buy and hold approach

When you think of investing in the stock market as a long-term game, you will be less likely to get carried away by individual events along the way. The stock market has a strong history of recovery from losses. If you take a buy-hold approach – load up on quality inventory now and get stuck in it for decades – you are less likely to get burned. You are less likely to panic every time your portfolio value drops.