So, you want to start investing… Kudos to you! Not all of us have the guts to start something new and especially not something many are intimidated by like investing.
Believe it or not, stocks aren’t as scary or complicated as everyone might think. They can actually be fun!
There are a ton of opportunities to grow your money and do it much FASTER than any savings account.
Most people think you need a lot of money to make money but you can invest as little or as much as you’d like. My very first stock investment was for only a few hundred bucks and I made over $4,500 with little to no work on my end.
Here’s how to invest in stocks: 3 no-brainer hacks for newbie investors
Disclosure: This is general advice, and you should seek help from your own professional as situations can vary.
1 – Lose small
Imma level with you here…If you’re investing, you’re going to lose…there’s no way around it. The sooner you accept that the better.
Now that we’ve gotten that grim reality out of the way…
Your goal should be to win big, lose small.That’s the ultimate winning strategy.
How does one accomplish that?
You’re going to want to set FIRM loss cutting rules.
Seems easy enough right?
It’s actually not…studies have shown that the majority of investors hold on to their losses.
Why? Well, if we don’t sell, we can tell ourselves there is hope and it could still turn around… Sadly, that very mentality results in the most devastating losses.
So what can you do about it?
Decide exactly how much money you are comfortable losing.
Personally, I’m fine with losing 7% of what I put in. That means that if I bought a $100 stock and it drops to $93, I sell without hesitation and take my $7 loss.
That 7% is my insurance. I know that I will never lose more than $7 on $100. If the stock rallies back then I can buy it again but I will NOT wait around as it tanks hoping it goes back up.
Think of it this way… if you bought fire insurance on your home and it did not burn down. Would you be disappointed? Would you think you made a poor financial decision? Of course not.
You never know whether your house will burn down or not (hopefully it never does) but just in case, you have insurance. That insurance is your way of making sure you never lose big.
Setting firm loss cutting rules is like getting insurance to protect yourself against potentially devastating losses.
2 – Invest in what you know
As a consumer, you have insight into what products are good or bad. What sells and what doesn’t.
Ultimately, if something new comes out, you try it and it sucks… you’re not going to want to use it again. Right?
Well, guess what, that knowledge you have as a consumer is INCREDIBLY valuable. That what gives you one up on wall street.
During a lifetime of buying cars, gadgets, services, etc you know a thing or two about what makes something good and what makes it bad. The best part is, you know it before wall street does.
Learn to leverage that as an investor.
Why did we all stop going to Blockbusters and get a Netflix account? It was clearly a much better service. Because of that, it took over that entire industry and sent Blockbusters into bankruptcy.
As a consumer, it was clear that Netflix was far more convenient and overall better. The problem is, most of us don’t connect our consumer knowledge to our investor mind.
Keep a lookout for what works for you and what doesn’t and use that to find investment opportunities.
3 – Practice Makes Perfect
Don’t go James Bond thinking you’re unstoppable. You wouldn’t drive a Ferrari around without learning or practicing how to drive first. The same goes for investing.
Before you go knee deep, splash around in the shallow waters.
You could start with a small investment if you’re really keen on getting started ASAP but it’s a good idea to start with monopoly money.
What do I mean by monopoly money?
There are a number of free sites that let you basically play with pretend money. All the other variables are the same. Everything is exactly as if it was the real deal. Your stocks react in real life and the market fluctuates but you’re using fake money.
You can get started with MarketWatch HERE.
It’s totally free and you can invite friends to join you. It can actually get really fun when you start competing against each other.
Remember, as an investor, everything will not always go your way. You will make mistakes and you will lose some money. But the goal is to win big and lose small. Leverage those mistakes. Use them as learning opportunities. You will only get wiser with practice.
But practice is only one part of the equation. Education is the other key component to success.
You wouldn’t be expected to speak mandarin without ever learning the language.. right? So why would anyone expect you to speak stocks without learning first?
Practice is the repetition you need and learning is the foundation.
Success without both is unlikely. Just like you wouldn’t be able to speak mandarin without learning and then practicing it. Or you wouldn’t expect someone to perform surgery without going to medical school and doing their residency. The same goes for investing.
It is not by any means rocket science but you do need the foundation to succeed. If you’re interested in kickstarting your investing education and you’ve liked the tips in this article, check out this free 10 Ingredient Recipe to become a successful investor.
Do you have any other tips on how to invest in stocks for beginners?