Investing is a great way to grow personal savings. Who doesn’t want to retire early and live off of the yields from their investment portfolio? While anyone can invest, not everyone can do it in profitable and consistent fashion. Successful investors, manage investments and know a few important things that novice and intermediate-level investors neglect.
Investing really can have a huge impact on your savings and help you find success. Here are five things about investing that you probably didn’t know.
Investing is Long-Term
If you buy and sell stocks on an hourly or daily basis, you are a trader. The term is used to refer to modern day investors who trade within a shorter timeline.
Revered investors including Benjamin Graham have also called these people as “speculators”.
It is important to understand the difference between investing and speculation as it will affect how you approach the financial markets. Investors engage in activities well thought out and meticulously examined. Their portfolio is constructed of assets that promise safety of capital while also providing adequate returns. Speculators, on the other hand, lack one or more of these characteristics.
If you are going to invest, you have to be in it for the long haul. That is why it is essential for you to do your research and find the best possible investments for you. You can even get some professional help and opinions.
Investing is Boring
If you’ve been lured into the investing realm because of movies like “Boiler Room” or “Wall Street: Money Never Sleeps”, you’re probably expecting something hyped up, like a million of dollar position on XYZ stock, never-ending colorful blips on five or six computer monitors, and lively after-parties stocked with the fanciest drinks and appetizers.
Unfortunately, investing your own cash may not live up to that vision of excitement and pizzazz.
It can be boring to watch stocks move by only a few cents per day, only to end the day right at the price level it started at. When it comes to things like this it is essential for you to be patient and do all that you can to not get bored.
Investing is definitely a long term thing, so be prepared to have to wait and see fluctuations in stocks.
Investing Involves Risk
A lot of people will argue that, if an investment has a chance of losing money, it’s speculation or, worse, gambling. Although investing properly minimizes the level of capital risk, it does not completely eradicate it from the big picture. The trick is to embrace this inherent risk instead of pretending to manage or accept it.
If you genuinely feel okay losing a few bucks to double or even triple it over time, investing will be much simpler. Minimize the stress by reading investing guides that provide actionable tips regarding risk management. When it comes to investing it is definitely essential for you to be prepared to take risks. If you aren’t ready to take some chances investing may not be what’s right for you.
Investing is Diverse
When laymen talk about investing, stocks are usually the asset of choice for the conversation. Albeit, investing does not immediately refer to stocks. Although it’s a popular investment vehicle whereby investors park their capital to appreciate, there are a lot of other equally profitable assets you can trade, such as currencies, commodities, bonds, and indices. Failure to capitalize on this by diversifying your investment portfolio exposes your capital to a greater degree of risk.
Investing is Unbeatable
Or should we say the markets are unbeatable?
Despite the myriad of hedge funds and bankers touting their huge returns year after year thanks to algorithms capable of trading on a millisecond rate, it is mathematically impossible to beat the market in the long run. Among the 3,600 plus publicly traded stocks in the United States, a total return of 33.6 percent was generated during 2013.
Some of the companies outperformed the market’s gains while some fell short.
Hopefully, these five facts have changed your perspective about investing in financial markets. Always respect the power of the markets and the herds of investors and traders driving it. Keep risk low at all times and you’ll definitely survive and probably even thrive in this activity.