Some tips when investing
Some tips when investing
Now that you have identified your goals and have a general framework on how to go about investing and choosing stocks, we want to leave you with some tips as you embark on this journey:
- Diversification is important
When you develop your portfolio don't undermine the importance of diversification. Having a diversified portfolio could reduce the risk you are exposed to without necessarily reducing your portfolio's expected return. Having a diversified portfolio means investing in multiple stocks that are not perfectly correlated. This can help reduce unsystematic risk (go to definitions for unsystematic risk meaning), however, diversification can never eliminate systematic or market risk (go to definitions for systematic risk meaning).
- Eliminate the noise
You'll hear the news here and there either positive or negative. You'll hear opinions left and right from people who own or maybe not own the stock you invested in. It's important in these circumstances to take a step back and assess. Remember your analysis and thesis.
- Emotional decisions will most likely hurt you
Don't make emotional decisions, most probably it will be a bad outcome. FOMO is real! Remember the goals you have and the framework you set to make an investment decision.
- Timing the market is very difficult
We've probably all tried timing the market, we can bet most likely it never worked 😝 . If it did, you were lucky! Historically being in the market for the long term has generated stronger returns than trying to time it. Here is a nice read on when Buffet (a value investor) challenged a Hedge Fund (an active investor), check out who won 😉 .
Also, no one knows "when to invest" or "is this the bottom" investing consistently (either on a monthly or bi-monthly basis) might be the best strategy.
- Be greedy when others are fearful
The famous quote! When markets are shaky and investors are afraid and panic selling, could be the best of times to invest. For example, if you invested in the S&P 500 during the dip in March 2020 you could have made ~9% when it rebounded a month later in April, and if you held till August 2020 you could have made ~16%.
Remember your goals! Hopefully, the tips above help you in becoming a better investor ❤️. It's always important to remember your goals and what you want to achieve. Without a goal, you can't score! And by the score we mean returns 🚀 . Remember your goals and reassess from time to time. We wish you a successful journey ahead and a life full of richness, health, and happiness ❤️ good luck 🚀 !