I have had the pleasure of working with new investors as I have traveled the world for many years. Soon, I will be traveling to India where markets and investing are very popular. Just like every other time I have talked to new and existing investors, I make sure and tell them that before they start risking their hard-earned money in the markets, it is critical to understand what it really takes to become a consistently profitable investor who actually achieves their life goals.
In my opinion, if one does not prepare themselves properly, they really are decreasing their odds for success well before they even open an account. It is critical for every new investor to fully understand the disciplines required and more importantly, why they are required, right at the very start. In this piece, I am going to share the three key areas to focus on which will not only ground you in the reality of proper investing but also help you to achieve your life goals effectively.
Education is where the journey starts, and for many this is where it ends as well. Most people say education is the answer when it comes to successful investing in the financial markets, I completely disagree. Education is really why most people lose money and fail, because most financial education is either very flawed or intentionally misleading. Proper education is the answer, and without it you are likely to quickly find yourself, time and time again, on the wrong side of the market. Meaning your hard-earned money is being transferred into someone else’s account.
Many new investors forget that this is a skill which needs to be honed and developed. Properly investing requires superior skill as so much is at stake. Much like a doctor trains at medical school or a lawyer trains at law school, successful investors have also been trained and educated in a very similar fashion. To learn how to do a job well, one needs to be instructed by someone who is already doing that job and who can do it effectively. However, many hopefuls decide early on to skip the education process and jump right in, good luck. Ask yourself an honest question: What are the chances of this working?
If successful investing was as easy as just diving in with very little understanding or guidance from a professional, then everyone would be doing it and making more money than they ever dreamed of. As mentioned above, investing is competition. Each and every time you buy there is someone on the other side of that investment selling it to you, trying to take your money. The investor who is more informed, more educated in the process, is typically going to come out ahead.
The stark reality, though, is that the vast majority of investors out there end up falling well short of their goals, even with a stock market that keeps making new highs. The alluring thing about the market is that it tempts the newcomer with dreams of easy money and wealth, and with humans being the emotional creatures we are, these temptations usually end in frustration. One of the many pitfalls of investing is that it is also accessible and anyone can get online and open an account in a matter of minutes. Does this mean then that we should take this route? It’s almost like believing anyone could perform open-heart surgery after reading a book about it… You could try, but not likely successfully.
Once we have received the right education, we now have the tools to do our job but this does not mean that it’s smooth-sailing from the very start. Consistent success is gained from a consistent set of actions and rules. The key is a proven set of rules that produces profits that help you achieve your life goals no matter where the markets are going; up, down or sideways. Also, a sound plan needs to be followed from the very start and the rules have to be followed. It takes discipline to adhere to managing risk, to know why you are buying or selling and to repeat the process over and over again like a robot.
The final piece of the puzzle comes from having the patience to let time and strategy do its work. You need time to execute strategy and see results over and over. In addition, market opportunities that are low risk, high reward, and high probability aren’t offered every day or every week. You must have the patience to let quality market opportunities come to you. Many people fall in the trap of jumping in the market anywhere and that is never a winning strategy. If the market doesn’t present you with the solid investment, then simply move on and patiently wait for the right one to come along. With time and experience in the market, you learn to develop this patience. You may even discover that if you don’t rush for success, it may actually come to you much sooner than you may expect.
Proper investing is not that hard if you have the right education, have the discipline to follow your rules and the patience to let quality opportunities to come to you. If you don’t have those key qualities, you will likely lose your money to someone who does and certainly never achieve your life goals. The goal is to live the life you choose to live on your terms. When it comes to the money needed to do that, nothing gets you there faster, in my opinion, than proper investing.
Hope this was helpful, have a great day.