If you’re a new investor, putting your hard-earned money to work and figuring out how to invest can seem daunting, given all the factors that impact the market and the risks you have to consider. It’s important to grow our money and outpace inflation, but we don’t want to lose any money we worked so hard to earn and save.
However, investing doesn’t have to be difficult. In fact, a simple buy-and-hold strategy is one of the best ways to invest your money. More often than not, it’s poor decisions that lack discipline and are based on emotion that get investors into trouble.
For new investors, the key to having success when you’re first starting out is all about eliminating mistakes. As Warren Buffett has said, “It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes.”
Here are three common mistakes investors make and how to avoid them, so you can have confidence when investing your money.
If you want to know how to invest with confidence, start by setting clear goals
Often, one of the first mistakes that investors make when looking to start investing is that they don’t set clear goals for themselves. Setting goals is crucial, because it forces you to consider what you’re trying to accomplish and how much risk you’re willing to take on to do so.
Setting goals will also help you to determine how to invest, which strategies you want to use, and which stocks to start with. Because once you’ve determined what the ultimate end goal is, you can start to figure out how to get there.
Before you even begin to invest your money, it’s crucial to decide what you’re investing for, when you may need that money, and how much risk you’re willing to take on in the meantime.
Don’t constantly watch markets
One of the biggest mistakes new investors make is constantly watching the markets. It’s certainly important to keep up to date with what’s happening and monitor your stocks and how they are performing. However, constantly watching the markets can lead investors to make emotional decisions.
Instead, since we are investing for the long haul, it’s crucial that you don’t pay too much attention to the daily movement of stocks. After all, we should be investing for the long run. It’s the safest way to put our money to work. And if we are buying companies that we plan to own for years or even decades, then how the stock performs over the next week or month is essentially irrelevant.
If you’re a new investor and want to learn how to invest and minimize your mistakes, one of the first to eliminate is constantly watching markets.
Give your money time to grow
Lastly, and one of the most important tips for new investors, is that you have to give your money lots of time to grow. This can mean more than one thing.
Firstly, it goes hand in hand with not constantly watching the markets. If you buy a stock and it falls in price for a few months straight, many investors might give up on the stock. For example, if investors had bought Shopify six months ago before it fell by 70%, many would be looking to get their capital back now.
However, owning a stock for only a few months doesn’t give the business anytime to achieve meaningful growth. It’s crucial that you give these stocks time to perform and grow. However, if you want to learn how to invest, taking advantage of compound interest is also one of the most important factors.
Therefore, giving your money as much time to grow also means starting to invest as early as you can. The longer your cash is invested in the stock market, the higher your ultimate potential will be.
If you’re a new investor wanting to learn how to invest, avoiding these three common mistakes will help you go a long way.