Stock investing is one of the ways you can build wealth starting from scratch when you done the right way.
There are three ways you can use investing in stocks to enhancing your financial fortunes:
- You may invest in the market for active income
- Save towards your retirement.
- Or accumulate wealth through the stock and leave a legacy for your family’s future generation
All three ways or a combination of each are available for any investor who knows how to investing in stocks.
The investing experience that most investors have in the stock market is losing money. The truth is you can minimize your risk of investing in stocks and, simultaneously, build wealth.
Most investors in the stock market lose money because they do stock market investing the wrong way.
A study done by the University of California’s Business school into the behavior of individual investors in the stock market found that most individuals do stock market investing in a way that harms their long-term financial status
Some of the behaviors identified among individual investors include:
- selling winning stocks while holding on to losing investments
- are heavily influenced by the news and past performance of a stock
- engaging in stock investing in such a way that gave them feel as if they were gambling
- holding a large proportion of stock investments that are not diversified
The wrong way to invest in stocks
From personal experience and research into stock market investing, I believe the following are the wrong way you can do stock investing.
- Lack of a financial plan for investing in stocks. If you don’t have a reason to invest in the stock market, don’t invest. What you should do instead is save your money in a safe CD
- Investing in hot tips. The absolute worst way to invest in stocks is to buy shares because you heard the financial news pundits talking about the “next big stock” to break out and
- Investing for a “big break.” I am sure you have heard of stories of investors who bet their whole life savings on a particular stock and then lost it all.
- Investing with no exit plan. That’s a sure way to lose money because you cannot predict the stock market.
- When you hold on to a losing investment because you love the stock not your money
The right way to invest in the market
On the flip side, you can invest in stocks like warren buffet and bank profits from stock investing…
Here’s the right way to stock investing my honest opinion, and from experts that you can use to build wealth
- Have a plan and goal before you start investing in stocks
- Do your research and learn how to analyze the market
- Do asset allocation so that you can lower your risk and diversify your investment
- Remember, stock investing has inherent risks. You may lose your money. Focus on the risk and determine it for each investment you buy
- When buying a stock, determine your entry price and don’t try to chase its market price
- Always put in place a stop to minimize your loss and protect your money
- Keep your winning investments and get rid of your losing investments
- Have an entry criterion when you invest and your head when you buy stocks.
- Don’t let your emotions rule the investing decisions you make
- Invest in the stock of recession-proof companies. These companies will outlive you, and you can pass the investment to your future generation
The bottom line of stock investing is that you’ll build wealth and enjoy an enormous gain when done the right way. When you invest in stocks the wrong way …you’ll only have yourself to blame