Many Americans are scared when it comes to investing and I get it. You don’t want to see your hard earned money go to waste on a specific investment. However, saving is generally worse than investing. If you save your money, inflation will eat away at it year after year. In other words, your dollar amount will decrease over time. In this article, I’m going to be breaking down my three best tips on how you along with the average investor can beat the stock market. Let’s get started!
1. There are no shortcuts to building wealth:
As we all know, it takes years and years to build the kind of wealth you desire. Find a good mutual fund and investment vehicle that has shown to get a consistent return over decades. If you look at the S&P 500, it has been consistently growing throughout history even though it has experienced some corrections and recessions. The last thing you want is a lot of volatility and speculation in the assets that you are invested in. The biggest takeaway is learning to ride the market through all of its ups and downs. Invest in quality companies that have a proven track record in a diversified portfolio. Vanguard mutual funds are a great option. All in all, it’s your goal to stay disciplined no matter where the market is at the time.
2. Diversification is very important:
Like Warren Buffett says, “Don’t put all your eggs in one basket”. When he says that, he’s referring to investing and how you shouldn’t put all of your money into a single investment. The reason is that you need to rely on that one asset to produce and if it doesn’t, you’re out of money. Instead, Buffett says to diversify into multiple investments that have a proven track record. In other words, invest in quality companies. Apple, Google, and Amazon are all quality companies that aren’t going anywhere anytime soon. By diversifying into many quality assets, you’ll take less of a hit financially when the market tanks.
3. Don’t invest in things you don’t understand:
This is very self-explanatory but many people fail to abide by this rule. This is one of the many reasons why 90% of traders active in the markets fail. If you don’t understand what you are investing in, it’s best to just not invest at all. For example, a person who successfully flips cars for a living wouldn’t try and flip real estate. Why? Because they already have a proven track record of flipping cars. This goes for all types of investing. All in all, focus on the investments and assets you can control. Always formulate a plan before you invest in anything. Make sure that the potential for profit outweighs the potential for loss. The last step is to never invest based off of someone else’s opinion. It’s your hard earned money and you should get to decide where that money should be invested.
All in all, I hope these four tips help.