Investing in the stock market isn’t difficult. Unless you make it that way. The simple truth behind investing is that you can do it and be successful if you just follow a few guidelines along the way. Let’s review some tried-and-true investment principles.
Know The Advice
You should avoid taking stock tips from people whose investment success is an unknown. Everyone has that friend who seemingly knows of the “next hot stock,” but rarely is that person correct. As USA Today reports, casually buying stock because some random person (or even that friend) suggests doing so is gambling, not investing.
What is Recent is Not Forever
Don’t fall victim to what’s called the “recency effect” — the tendency to assume that the most recent trend will continue forever — when you invest. Keep in mind that if the stock market is weak, it will eventually return to the mean. If the market is strong, it will do the same thing.
Patience is a Virtue
The best investors buy stock with the long-term in mind. You need to stay calm and patient during the rough times. Know that the big picture is the key. The market goes up and it goes down. It’s important to stay the course if you want to eventually reap the rewards.
Finally, take your time when investing. Consider using “dollar-cost averaging” to slowly build your portfolio. This strategy involves investing a set amount at regular intervals. You buy more shares when the stock price declines, and less shares when the stock price rises. Over time, it averages out.