5 Things I’ve Learned from Investing in the Stock Market
Back in 2019, I opened a Robinhood account, as I wanted to invest in the stock market. The only problem was… I didn’t know ANYTHING about the stock market or how it worked. So, after opening my account in September of 2019, it wasn’t until March of 2020 that I deposited my first $1,000 & started investing.
Still, at the time, I didn’t know anything about investing. The only difference is that, then, I finally had the courage to deposit my hard earned money into the app. Mind you, I was only 19 at the time. Being this young, I was a bit wreck-less in my approach, but I learned 5 critical investing lessons that anyone can take & apply to their own life.
Lesson #1: Don’t day trade
It’s only until after you’ve lost money that you realize day trading is a really, really bad idea. The reason it’s such a bad is because the success rate is very low.
The success rate for making money from day trading is actually quite low. Depending on the source, only around 5% to 20% of day traders consistently make money (Blystone, 2022).
Day trading is, arguably, another form of gambling & as most of us know, most “gamblers” lose money. However, you can make money from gambling, yet since most games are based on more luck than skill, most people end up losing. So don’t gamble & avoid losing.
Lesson #2: Invest only what you can afford to lose
Since investing has it’s ups & downs, many people become emotional with what & how they invest. In fact, many people often buy when markets are up & sell when markets are down, which is quite the opposite of what we want to do, that is, to buy low & sell high.
If you invest only what you can afford to lose, then your emotional reactions will be limited & your day-to-day life won’t become jeapardized by crazy market swings.
Lesson #3: Invest as early as possible
Many of us are told to “take it easy” or “slow down”, whether referring to our schooling, work or relationships. Investing, however, is very beneficial, especially to those who start at a very young age. Why? Because of the “eighth wonder of the world” known as compound investing.
Compound investing refers to the gains on top of gains on top of gains & so on. As your money grows, the money on top of your money grows, leaving you with exponential gains. Put simply, the earlier you start, the more money you will have, as this leaves more time for your money’s money to grow.
Lesson #4: Invest frequently & consistently
Investing, both, frequently & consistently is sure to leave you with the best possible outcome, MORE MONEY. However, many people don’t take this advice & instead invest whenever they feel like it.
You see, you don’t have to invest large sums of money to be considered a frequent, consistent investor. You could start with $5/day & slowly increase your contributions as your income increases or as you see fit. This consistency builds a good habit, leaving you wanting to contribute more & more everyday.
Lesson #5: Invest in what you understand
Many people buy the next “hot” stock, only soon to realize that was one of their biggest mistakes. This is because you’re buying based on the opinions & decisions of others, as opposed to your own. Often, this leaves many investors confused at where & why they went wrong.
The moral of the story is that you must only invest in what you understand, as this is how we enable ourselves to take responsibility, learn from our mistakes & become better investors.
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