You can increase your investing confidence and skill.
It can be hard to get started with investing if you’re afraid of losing money. And since investors feel the sting of losing way more than they feel the high of winning, it’s important to go into it with enough confidence to develop and stick to a strategy that allows you to save, grow and protect your assets, says John Palazzetti, president of Park Avenue Securities in New York. But gaining confidence in fluctuating stock market conditions when you’re not a professional is easier said than done. Luckily, experts offer the following tips to help you gain the confidence you need and hopefully, keep your emotions out of it.
“Your first day investing isn’t going to result in the beginning of your run as the next Warren Buffett,” says Chris Gure, a financial consultant with Fortress Financial Partners in Raleigh, North Carolina. Instead, don’t pay too much attention to what pundits may be telling you to buy or sell, and how to do it. Instead, “look at the market over a long period of time, ideally your investment horizon. Does it still make you nervous?” Gure says. “It’s OK if it does, that just means you need to find a more balanced investment strategy.” He suggests reading your investment plan twice “before turning on the TV or logging in to check your investment returns.”
Start small and invest over time.
“The best way to develop confidence in the stock market is to invest small and often,” says Laurie Itkin, financial advisor and wealth manager at Coastwise Capital in La Jolla, California. Employer-sponsored retirement plans, like 401(k)s and 403(b)s that often come with a company match, are a great way to build your confidence, says Michael Taylor, an investment strategy analyst at Wells Fargo Investment Institute in Houston. And by starting small, you can afford to make mistakes that help you to become a better investor, says Daniel Kern, chief investment officer at TFC Financial Management in Boston. “Even the best investors make mistakes,” he says. “Making mistakes is an important part of the learning process.”
Being unafraid is one thing, but being overconfident can be detrimental too, Palazzetti says. That’s because the more confident you are, the more likely you will be to buy too much of something, says Steven Jon Kaplan, CEO of True Contrarian Investments in New York. Overconfident investors often have trouble distinguishing conviction from stubbornness, Kern adds. On the other hand, lacking the confidence in your ability to learn and grow your investing knowledge can result in a struggle to stick with a long-term investment strategy. “Confidence mixed with a healthy dose of humility may be the best combination for aspiring investors,” Kern says.
Don’t be afraid to ask for help.
Keep in mind that investing is a learning process and you’re not expected to be an expert at it off the bat. “Everyone feels comfortable going to a doctor when they’re sick, an accountant for their taxes, or a lawyer for counsel. Find someone you trust and ask what they are invested in and why,” Gure says. But, also remember that their goals and risk tolerance may not be the same as yours, Gure says.
Think of a downturn as an opportunity.
There’s a common misconception that investing has to be complex and sophisticated to work, says Asad Gourani, founder and CEO at AG Wealth Management in Ann Arbor, Michigan. There’s also a misconception that it’s all about hedging a downturn or loss. That leads investors to underperform the market because they sell out of fear right after a downturn and the worst is over, Gourani says. “Although it is easier said than done, investors should realize they’re in the markets for the long term, not for a quick buck, therefore they should ignore the noise and think of every downturn as an opportunity,” he says.
Pay attention as you learn.
Monitor your portfolio to grow as an investor, says Andre Ratkai, president and chief investment officer at Praxis Advisory Group in Denver. “A mentor of mine once said, ‘Andy, the real work begins after you’ve bought the stock.’ He meant that watching and monitoring was key to knowing that the security is doing what you expected it to do,” Ratkai says. Review your stocks every two weeks and mutual funds and exchange-traded funds every four, and do research. You can learn enough to potentially conquer investing fears. “Everyone has investments that don’t work out — everyone” he says. “The key is to recognize the winners versus the losers, deal with the losers, and move on.”
Tips to boost your investing confidence.
— Avoid distractions.
— Start small and invest over time.
— Resist overconfidence.
— Don’t be afraid to ask for help.
— Think of a downturn as an opportunity.
— Pay attention as you learn.
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