When it comes to the "How to's" of investing, there are many ways to go about investing with no real right or wrong answer. Some people want smaller, safer returns and other people are willing to take on a bit more risk for a higher potential reward. There is no one size fits all in the world of investing.
With that said, one of the most traded types of securities out there are stocks. There are three things that impact the success of all investors:
1. Strategy - The plan created to achieve the investor's goal.
There are an infinite number of strategies that can be utilized to achieve a goal. It is important to align the strategy with the objectives of the goal.
If the goal is to make a small and safe return, invest in something like Certificate's of Deposit (CD's) which earn an average of 2-3%.
If the goal is to beat the stock markets average annual return of 8-10%, invest in more volatile stocks.
The purpose of a strategy is to reach the desired goals of an investor.
2. Execution - How the strategy is actually carried out.
An investor's execution is heavily impacted by their mindset and emotions. When you’re making thousands of dollars off of the simple click of a button, it feel like an extreme high. Alternatively, when you’re losing thousands of dollars in mere seconds, the lows can be low. How you deal with these changes in the value of your investment is reflective of your mindset, which will determine the execution of your plan.
When it comes to investing in stocks, for example, where your goal is to make capital gains, the only two points in time that matter are when you bought the stock and when you sold the stock. Everything in between these two moments don’t matter. If you are up 10% before you sell, it is considered a paper gain and when you are down 10% before you sell, it is considered a paper loss because it is only true in the current moment. The outcome of your investment will only be set in stone when you sell the stock.
Having the proper emotional control is important when dealing with the highs and lows.
If you cannot control your greed when your investment reaches your desired percentage return outlined in your strategy, then you may choose not to sell the stock at the previously desired amount. Then the stock could potentially take a turn and drop in value for an extended period of time.
Takeaway: Nobody ever went broke from taking a profit.
If your investment is experiencing a sharp drop in value and you cannot control your fear of losing your money, you might secure a significant loss as opposed to securing your goal.
Takeaway: Patience is key.
3. Investment Pick - How the investment actually performs
There are many factors outside of the control of investors that impact how an investment actually performs. For this reason, most advisors say that investing should be played like a long term game. Most of the things that can impact an investments profitability in the short term are not going to have as much impact in the long term.
The best way to be successful as an investor is to only invest with money you won't need in the near future. Be patient, do your research and get experience on an investment simulator before investing with your hard earned cash. This will help you avoid making costly mistakes.
As an investor, it is important to stay on top of any news related to your investments. This enables you to make the best financial decisions to meet your needs.
Benzinga Pro makes filtering different news sources for relevant information a breeze. If you have your hard earned money invested, it is definitely beneficial to stay in-the-know of anything that can impact the value of your investment.
Benzinga Pro has many different resources that allow you to customize and filter all the noise on Wall Street so that you only get things of relevance to you and your strategy. This can save you a lot of time and money.
We highly recommend giving Benzinga Pro's two week free trial a chance. Benzinga Pro has many different resources you can access during this free trial period including a free 1 hour course that can help you understand all of the capabilities of the software and how you can customize the experience to meet your needs.