The Secret to Successful Investing
What is the secret to successful investing? It is to do nothing—well, not quite nothing, but our point is that to be successful, you need to limit your activity as much as possible when it comes to managing your investments.
The Risks of Short-Term Trading
Short-term trading involves all kinds of risks. Essentially, a trader is attempting to gauge how the market feels about a stock. Here’s an experiment for you to conduct: walk over to your partner and try to guess how they’re feeling about something. You might be able to guess what is wrong some of the time, but not all the time. This is similar to trying to predict the market’s sentiment.
The Power of Buy and Hold
The most intelligent investment decision you can make is to buy and hold stocks for as long as possible. Leave the constant jumping in and out to the traders and other speculators. Resist everything that can potentially cause you to exit early or trade too much in a single stock.
If you don’t have the cash to pay your bills, you’re going to be tempted to sell some of your investments before they have a chance to blossom fully.
Essential Savings Priorities
- Your Rainy Day Fund: 3-6 months’ worth of living expenses that you’ve saved up in case you or your partner lose your jobs.
- Readily Accessible Cash: This money should not be invested under any circumstances. Your rainy day fund should be held in readily accessible cash.
- Tuition Payments: Money that is needed to pay bills or your child’s tuition should not be invested in the markets.
- Down Payments: Even if you’re planning on purchasing a home several years down the road, don’t rely on the stock market to generate enough money for a down payment.