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4 Things to Know Before Ever Investing in Stocks

4 Things to Know Before Ever Investing in Stocks

Many people hear about the stock market for the first time and assume that stocks are a magical way to turn money into more money. While this may be true for some people, for a vast majority of others, it is just a way to turn money into no money. This is not because investing is the same as gambling, but rather investing without knowing what you are doing is the same as gambling.

Many investors lose money every year because they don’t understand basic investing principles. The sad part is, it doesn’t have to be that way. Some people are able to make profits year after year by employing smart, safe investing techniques and sticking to it. Here are four things you should know before buying a single share of stock:

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Never invest short-term

Many new investors make the mistake of assuming that they can pull out of the stock market at any time. While this is technically true, it is not totally realistic.[1] If you put money into stocks with the plan to sell in a few weeks, or even months, you may find that at the point where you would like to sell your shares, the stock has lost half of its value. This means you could technically pull out, but you will lose half your investment by doing so.

The key to avoid this is to invest for the long-term. Never use money that you will need to pull out in the next few years. You can avoid incredibly stressful and financially devastating results by doing so.

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Stock movements are not random

Many people assume that the prices of individual stocks change on a day-to-day basis completely randomly. This is not the case. In fact, there are many patterns to look for when looking at the price of a stock. Often you will see a stock price follow the same pattern for months, or even years. This can help you identify when it is a good time to purchase shares versus when it is a bad time to purchase shares.

This is called technical analysis and investors do it every single day. Before investing, you should read at least a few books about technical analysis to make sure you understand what to look for when you are looking at stock prices.

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Patience

Many people just getting started in stocks feel an unnecessary sense of urgency. They seem to feel as if they are missing out on something and if they don’t get in on a certain company’s stock now, they will forever miss their opportunity. This is far from true. There are opportunities on the stock market every single day. Don’t even start looking for these opportunities until you know exactly what you are looking for and how to tell if you are getting a good deal or not.

Don’t rush into buying stocks ever.[2] This will inevitably lead to heartache and lost money. If you have any misgivings about the purchase, pull out and wait until something you feel great about comes along.

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Try virtual trading

The best way to learn the stock market is through virtual stock exchange. There are a lot of sites that offer virtual trading and you can use those to be able to play with fake money and decide if you have what it takes to really make money on the stock market. Once you have a good system with fake money that seems to work every time, you can start putting a small amount of real money into the stock market.

Above all, play it safe. The stock market is real money. Don’t turn it into gambling. Do your research, take courses, talk to experts, and only then should your hard-earned money be put into markets.

Reference

[1] Business Insider: 25 Things To Know About Investing by 25
[2] Investopedia: Patience Is A Trader’s Virtue

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Spencer Mecham

Personal Finance Coach, Digital Marketer

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Last Updated on April 7, 2020

4 Ways to Develop a Flexible Mindset

4 Ways to Develop a Flexible Mindset

How many opportunities have you missed because of a bad mood or being stuck in feelings of frustration?

I know I’ve certainly missed a lot. In fact, I can recall an exact time when I missed a great deal of opportunity. I was at a party filled with highly influential people. However, my girlfriend and I had just gotten into an argument because of my irrational expectations of how she would behave, and I wasn’t thinking clearly. I didn’t have any desire to talk to anyone or be open to interesting conversations. All I could think about was myself and my anger and frustration. I was caught up in this story; I was telling myself that I needed to be angry and I needed to show it. I can only imagine the opportunities I missed because I wasn’t flexible in my thinking.

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The mindset you need, then, is one of flexibility and not rigidity. You must be able to go with the flow of events without being disappointed by your expectations. This open-minded approach is a necessity if you want to be happy and experience rapid personal growth. These four ways below will tell you how to develop a flexible mindset.

1. See the feeling for what it is and accept it.

When you begin to notice yourself feeling frustration and anger, use that as a trigger to pause for a moment. See the feeling and sit with it. Don’t act, but stop and accept that you’re feeling this way. Understand that this feeling is just that ‒ a feeling. It’s not who you are, but merely a passing cloud in a sky full of clouds holding different feelings.

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2. Know that it’s OK to feel frustration and rigidity.

It happens to everyone. No one is perfect or immune to anger. It’s OK to feel this way. Give the feeling some space and compassion. It’s impossible to feel thankful and angry at the same time. By giving this feeling ‘some love’, you’re improving your mood and making it easier to come back to happiness. If you think of the feeling as a cloud, imagine opening up the sky and giving it the room to float away.

3. Notice what’s around you ― and breathe.

The key is to be in the moment. Too often we’re caught up in life and it whizzes by without us ever realizing it. Sit back, relax, and focus on your breathe for a bit. Feel it go in your nose, down your throat, into your stomach, and back out again. If you imagine your frustration as a thermometer, the more frustrated you are, the more it fills up. You need to give yourself time to allow it to cool off and that level to go down. Then, look around and be thankful for everything you see.

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4. Realize it’s OK to say, “I don’t know”.

It’s OK to not know how things should be. It’s also OK to not know how things are now. Not knowing sets you up to be able to freely investigate. Why are things this way? What series of events took place that caused this feeling? What unreasonable expectations did I have that put me in this place? Once you understand, you can fully let go and change your course going forward.

I hope these four steps help you let go of your rigid mindset and develop the flexibility to be happy and to experience personal growth. This shift in mindset will stop life from giving you lemons to make lemonade and start giving you whatever you desire. Just remember to pause, breathe, embrace, let go, and move on.

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