5 Investing Tips I Wish I Knew Sooner
We all learn from our mistakes, and unfortunately when it comes to personal finance and investing, those mistakes can be costly. While I continue to learn something new everyday, and like to believe I am perpetually becoming a better investor, there are many things I wish I had known sooner.
With experience comes smarter investing, but that doesn’t mean you have to always learn the hard way. Here are five investing tips that I wish I learned earlier on in my trial and errors:
Quit Being Obsessive: I have a bit of an obsessive personality, which does not always mix well with investing. As a result, I have to resist the urge to constantly check how my portfolio is doing throughout the day, and not let the day-to-day news affect my investing behavior. I have found many times that if I just ignored the noise rather than react to it, things would have worked out more favorably for me.
Stop Trying to Get Rich Quick: When I first started investing, 10 percent returns did not excite me. I thought, “How am I ever going to get rich by making only 10 percent on my little investment.” So, I chased high returns, took some gambles and lost big. Only after repeatedly losing money did I realize that creating wealth was a long-term strategy that required having the power of compound interest on your side.
Advice is Expensive: Rather than seeking the advice of successful, wealthy investors I took stock tips and investing advice from my non-experience and non-wealthy friends. Even worse, I took their advice without doing any research on my own. Those were costly mistakes. I think in most cases I was lucky to get out of situations by breaking even, but lost quite a bit of money at times.
Don’t Go “All-In”: I had a habit of doing a lot of research to build a “model portfolio.” Once I decided on the stocks I wanted to own, I would buy equal amounts all at once. Guess what happened? The stock prices would go down and I quickly owned a bunch of assets that had declined in value. Over the long run most of those positions worked out for me, but I would have made a lot more money if I purchased more shares as the price continued to fall rather than spending all of my money at once.
Have an Exit Strategy: Along with going “all-in” at once, I tended to simply buy stocks I liked and held on to them, regardless if the price went up or down. I didn’t have an exit strategy. I lost many opportunities to sell when the stock went way up, only to watch it tumble back down later. I also held on to stocks I should have sold and realized the loss, rather than hoping the stock price would rebound at some point. Now I have very specific purchase prices and selling criteria to minimize my losses and increase my gains.
Wealth Accumulation Action: You are going to make many mistakes throughout your investing career. Sure you will lose some money, but do not disregard mistakes as great learning experiences that will make you very wealthy over time. The sooner you learn sound investing habits, the better investing decisions you will be able to make and the greater your portfolio will become.
What investing tips do you have that you wish you had known sooner?
