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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.

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Spencer Mecham

Personal Finance Coach, Digital Marketer

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Last Updated on September 10, 2018

Overcoming The Pain Of A Breakup: 3 Suggestions Based On Science

Overcoming The Pain Of A Breakup: 3 Suggestions Based On Science

We thought that the expression ‘broken heart’ was just a metaphor, but science is telling us that it is not: breakups and rejections do cause physical pain. When a group of psychologists asked research participants to look at images of their ex-partners who broke up with them, researchers found that the same brain areas that are activated by physical pain are also activated by looking at images of ex-partners. Looking at images of our ex is a painful experience, literally.[1].

Given that the effect of rejections and breakups is the same as the effect of physical pain, scientists have speculated on whether the practices that reduce physical pain could be used to reduce the emotional pain that follows from breakups and rejections. In a study on whether painkillers reduce the emotional pain caused by a breakup, researchers found that painkillers did help. Individuals who took painkillers were better able to deal with their breakup. Tamar Cohen wrote that “A simple dose of paracetamol could help ease the pain of a broken heart.”[2]

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Just like painkillers can be used to ease the pain of a broken heart, other practices that ease physical pain can also be used to ease the pain of rejections and breakups. Three of these scientifically validated practices are presented in this article.

Looking at images of loved ones

While images of ex-partners stimulate the pain neuro-circuitry in our brain, images of loved ones activate a different circuitry. Looking at images of people who care about us increases the release of oxytocin in our body. Oxytocin, or the “cuddle hormone,” is the hormone that our body relies on to induce in us a soothing feeling of tranquility, even when we are under high stress and pain.

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In fact, oxytocin was found to have a crucial role as a mother is giving birth to her baby. Despite the extreme pain that a mother has to endure during delivery, the high level of oxytocin secreted by her body transforms pain into pleasure. Mariem Melainine notes that, “Oxytocin levels are usually at their peak during delivery, which promotes a sense of euphoria in the mother and helps her develop a stronger bond with her baby.”[3]

Whenever you feel tempted to look at images of your ex-partner, log into your Facebook page and start browsing images of your loved ones. As Eva Ritvo, M.D. notes, “Facebook fools our brain into believing that loved ones surround us, which historically was essential to our survival. The human brain, because it evolved thousands of years before photography, fails on many levels to recognize the difference between pictures and people”[4]

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Exercise

Endorphins are neurotransmitters that reduce our perception of pain. When our body is high on endorphins, painful sensations are kept outside of conscious awareness. It was found that exercise causes endorphins to be secreted in the brain and as a result produce a feeling of power, as psychologist Alex Korb noted in his book: “Exercise causes your brain to release endorphins, neurotransmitters that act on your neurons like opiates (such as morphine or Vicodin) by sending a neural signal to reduce pain and provide anxiety relief.”[5] By inhibiting pain from being transmitted to our brain, exercise acts as a powerful antidote to the pain caused by rejections and breakups.

Meditation

Jon Kabat Zinn, a doctor who pioneered the use of mindfulness meditation therapy for patients with chronic pain, has argued that it is not pain itself that is harmful to our mental health, rather, it is the way we react to pain. When we react to pain with irritation, frustration, and self-pity, more pain is generated, and we enter a never ending spiral of painful thoughts and sensations.

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In order to disrupt the domino effect caused by reacting to pain with pain, Kabat Zinn and other proponents of mindfulness meditation therapy have suggested reacting to pain through nonjudgmental contemplation and acceptance. By practicing meditation on a daily basis and getting used to the habit of paying attention to the sensations generated by our body (including the painful ones and by observing these sensations nonjudgmentally and with compassion) our brain develops the habit of reacting to pain with grace and patience.

When you find yourself thinking about a recent breakup or a recent rejection, close your eyes and pay attention to the sensations produced by your body. Take deep breaths and as you are feeling the sensations produced by your body, distance yourself from them, and observe them without judgment and with compassion. If your brain starts wandering and gets distracted, gently bring back your compassionate nonjudgmental attention to your body. Try to do this exercise for one minute and gradually increase its duration.

With consistent practice, nonjudgmental acceptance will become our default reaction to breakups, rejections, and other disappointments that we experience in life. Every rejection and every breakup teaches us great lessons about relationships and about ourselves.

Featured photo credit: condesign via pixabay.com

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