Investing Your Money (3 things to remember)
Jun 08, 2024Read time - 3 minutes / Disclaimer
Today let's review 3 things to remember when investing your money.
Knowing these can help you:
• Feel more comfortable.
• Have a clear plan.
• Avoid big losses.
Unfortunately, investing isn't common knowledge.
No One Teaches Investing
You don't learn investing:
• In high school.
• In college.
• At work.
It's something you must learn on your own.
With time and effort, anyone can learn investing.
Here's 3 things to remember on your journey:
1. Have a Plan
It's important to know what type of investor you are.
Are you a short-term investor?
Are you a long-term investor?
A short-term investor keeps their investments for:
• Days
• Weeks
• Months
A long-term investor keeps their investments for:
• Years
• Decades
• A lifetime
Being a long-term investor is easier than being a short-term investor.
Why?
You don't have to make as many investment decisions.
Short-term investors must decide when to buy or when to sell on a regular basis.
Long-term investors don't have to decide as often.
They make decisions and stick with them for the long-term.
Most people are long-term investors.
Creating an investment plan is much easier when knowing which type of investor you are.
2. Understand the Risks
The dictionary defines risk as:
"Exposure to something dangerous or harmful".
With investing, danger often means losing money.
The best way to avoid this:
1. Learn about investing before you begin.
2. Have a plan before you get going.
It's best to think things through in advance.
Things like:
• What will you buy?
• Why will you buy it?
• When will you sell?
• Why will you sell it?
Learning about investing and planning in advance helps lower your risks.
3. Manage Your Emotions
Warren Buffett is a well known investor worth billions.
He's great at explaining things in a simple way.
One thing he often says:
He's talking about how emotion affects our behavior.
For example:
If iPhones were half off, the Apple store would be packed.
But if stock prices drop 50%, most people sell (in a hurry).
Warren's made a fortune buying when stocks are on sale.
He also says:
"Be fearful when others are greedy, be greedy when others are fearful."
When stocks drop 20%, 30%, or 50% in price.
The average person sells.
Warrens made his fortune buying when that happens.
With investing, it's important to recognize and manage your emotions.
Here's 3 helpful tips:
1. Recognize when you're in an emotional state.
2. Avoid making financial decisions.
3. "Sleep on it" and consider your options the next day.
Emotion can drive us to make decisions we wouldn't normally make.
Conclusion
Investing is confusing when you're just starting out.
Fortunately, there's some great tools to help you learn.
Schwab has one of these tools.
They're an online broker people often use to invest.
They have a free app called "thinkorswim".
You can use Schwab's app to invest $100,000 of "pretend money".
You can invest in stocks, bonds, options and other things.
It's a great way to learn before using real money.
You can try it out here:
That's all for today.
See you next week.
