There is certainly money to be made when playing the stock market, but the first thing you have to ask before getting started is whether or not you have the personality traits to become an investor. That is what we will try to address throughout the course of this article.
The idea of investing may have come from hearing a story about someone who bought into a stock at a low price and sold it for a much higher price in a short period of time, making a nice chunk of change in the process. While that can happen, it’s not something that happens regularly for the average investor.
Here are some things you may do well to consider before you do any investing.
- Are you able to look at things objectively?
- Can you make decisions without any type of personal bias coming into play?
- Will you be able to stick to the amount of money you plan on investing?
- Are you able to stop yourself from adding more money when you lose on a trade?
You need to have a clear financial objective in mind when you start investing, and that has to be maintained over the long haul. If you are thinking of cashing in your retirement savings and «gambling» on the stock market, investing may not be for you.
If you can take a percentage of your disposable income and work hard at following trends on the market, you may do well. It helps to be able to look at your investing in the same way as you would a savings account. Sometimes the gains you make will be small, but as longs as your balance is increasing you will be on the right track to financial success. Before you start out, you need to be aware of just how much you can afford to invest, and you need to stick to that number.
Can you set goals and take advice from others?
We briefly touched on the fact that you need to have a plan when you invest. You need to decide whether you are saving for your retirement, trying to create a second income, or perhaps looking for shorter term investments that might yield enough to create a down payment for a car or home. Your financial goals will determine the type of investment that will suit your specific goals. For example, mutual funds or municipal bonds are often the way to go for those looking to start a retirement fund. Once you make that decision, you can then draw up a budget that fits your plan.
If you are new to investing, you are likely going to need some help to get the ball rolling. There are a number of large investment companies out there who have found managers and consultants ready to offer sound advice. Can you listen to that advice and choose the plan that works best for you? It’s important to be objective her once again, as the information and advice given may be contrary to what you wanted to do. Can you take that advice and understand that the experts know better than you do when it comes to investing?
While it may seem like an odd question, you need to ask if you have what it takes to pull the trigger on a deal. It can seem easy to make a down payment or a car or a home, usually because you have a tangible product right in front of you that show what you got for that money. That’s not the case with investing, and some people will balk at dropping thousands of dollars on what amounts to a piece of paper.
Do You Have The Patience To Ride It Out?
We are assuming at this point that you have done all your homework, taken advice, and have a plan on how to invest and how much. The final question you have to ask is whether or not you have the personality and patience to see your investment through to the end.
- Can you wait until the investments you made mature and bring in the money?
- Can you hang in there when your investments take a dip, which they most likely will at some point or another?
If you can let it go and are able to keep your end goal in sight at all times, you will be fine. If you are someone who stresses over every little detail, you may not be good with the ups and downs of investing. By all means check in on your investments on a regular basis, but always stick to the plan you had going in. Instincts and listening to good advice makes for a great investor.
If you went the retirement investment route with mutual funds, you really don’t have to check in that often. You really won’t see any changes on a monthly basis, so think about just checking in quarterly. If you have a fund manager, let him take control, whilst also making sure that he knows to contact on a regularly agreed upon schedule.