Investing for Beginners: Investing money can be scary, especially as a beginner. There is so much skepticism and fear around losing money, getting into the market at the wrong time, choosing the wrong investments, and everything in between.
Knowledge is power, and knowing how to invest will guide you in making confident investing decisions, no matter what is happening with the stock market. These investing tips for beginners are foundational, and according to many of the greatest investors (like Warren Buffet), they are critical to master for financial freedom.
I truly believe that sticking to these foundational investing principles will not only help reduce your investment risk (aka losing money), but also help you understand the investing basics you need to know to become successful with investing in the stock market.
With that being said, here are 5 rules you need to know if you are getting started investing as a beginner!
1. Focus on the Long Haul: This is THE MOST Important Rule
I am a long-term investor; always have been and always will be. This means that I am investing for goals that are 10+ years away, including retirement. Why? The longer your money is in the market, the more time it has to grow and recover from market dips. In fact, keeping your money in the market for a long period of time can help maximize compound interest, and ultimately your money will grow exponentially without any extra effort.
Short-term investing can be risky, especially because if the market dips unexpectedly (hello, COVID!), your money will lose a lot of value. If it’s money that you need to use for something right now or in the near future, that can cause some major problems. So, if you are investing as a beginner, ensure that you are focused on long-term growth rather than simply short-term gains.
2. Dollar Cost Averaging is Your Best Friend!
Dollar Cost Averaging is my tried and true investing strategy because it helps keep me in a set investing routine. I am ALL about money routines, so I like to think DCA was created just for me 🙂 It’s also a super simple investing strategy for beginners!
In short, DCA involves investing the same amount of money on a regular basis, regardless of the current economic environment. This allows investors (like you!) to take advantage of both highs and lows when purchasing shares of stock, so ultimately the price you are paying averages out. I follow this strategy by investing the same amount of money every week, and have been doing so for 2 years.
3. Don’t Try to Time the Market (Seriously… don’t)
When it comes to investing money, there aren’t many guarantees. One guarantee? If you try to time the market, you will lose money! This is an investing for beginners rule that CANNOT be overlooked.
There are investment professionals who literally dedicate their entire lives to learning the best strategies for investing, and even THEY can’t time the market. While it may be tempting, more often than not timing the market leads to greater losses. This is because we focus on prior events and try to “see all the signs” only to realize that we missed something, or something new happened that we couldn’t have predicted.
This is called hindsight bias. An important tidbit to remember? The stock market isn’t rational, and the largest swings in price are driven by human emotions. You read that right!! Many of the crazy highs and lows we see in the market has to do with human reactions, which is pretty hard to comprehend.
I’ll leave you with this: the market is smarter than you are; so let it do its job while you stick to yours.
4. Keep a Consistent Strategy
When COVID hit, I got a hundred questions asking if “now” was the best time to start investing, or if it was a better time to pull money out of the market because that is what everyone else was doing.
What did I do? I kept my money in my investments, and I continued to dollar cost average my investments on the same schedule as I had been before. Basically, nothing changed. As mentioned above, we can’t time the market. Investing should be simple, and it can be if you focus on the fundamentals. If it feels super boring, you’re doing it right.
5. Don’t Forget to Invest in Yourself
We choose to invest in the stock market to make some type of return, right? Well, the same goes for making investments in yourself. Spending money on courses, coaching, or tools that will help you advance or learn something new in different areas of your life is the ultimate investment.
You will see gains across all areas of your life, because you validate that you are worth investing in AND that you can make progress towards something you never thought you could before. The best investment you can make is in yourself, because at the end of the day, you’re all you have!
Keeping investing simple and sticking to the fundamentals is an easy strategy towards success. While there is a ton of investment information out there, a lot of it can feel confusing or make you question your decisions. If you are struggling to decipher what is important, what is right, or what is wrong, take a step back and refocus on these 5 simple investing rules!
DISCLAIMER: This article is based on my own personal experience, and should not be interpreted as investing advice. Invest at your own risk.