Getting started: 4 smart investing habits
Practicing good habits from the get-go will help set you on the right path.
March 11, 2021
1. Invest money you don't need today (or tomorrow).
We know that historically, the market has trended upward over long periods of time. But in the short term, it can be unpredictable. That's why it's safer to invest money that you won't need to cover your immediate needs (think your rent, groceries, car payment, and emergency savings).
Whether it's $10 or $100 left over after you pay your monthly bills, every bit counts. And by using this rule of thumb, you're still able to invest for the future without jeopardizing your current financial wellbeing.
2. Don’t put all your eggs in one basket.
Spreading your money across a variety of different investments (a process known as "diversification") can help you minimize risk. For example, by owning many different investments, you reduce the potential impact that a decline in 1 or 2 individual stocks or funds can have on the overall value of your investments.
3. Resist the temptation to sell if your investment declines in value.
The value of your investments will move up and down. If your investment declines, you may be tempted to sell to avoid steeper potential losses. While selling may bring you some temporary emotional relief, you could also end up missing out on a potential gain if it later rebounds.
Although there may be unique circumstances when you decide it's best for you to sell and take a loss, consider this: Even professional money managers struggle to time the market successfully in the short term. Many successful investors tune out short-term "noise" and stay focused on their long-term goals. Instead of trying to time the market, focus on making investments that you believe in and stick to your plan.
4. Continue learning about investing.
Knowing how and when to buy or sell the "perfect" stock is just about impossible. It’s most important to continue learning from your investing experiences and apply these lessons toward future investing.