Investing in the stock market is something many people are interested in doing, but thanks to how intimidating it can be for beginners, far too many give up before even trying. There is often a misconception that you have to know the ins and outs before you invest. While it’s true that knowledge is power, the only way to truly learn is to get in there and get your feet wet.
Let’s examine six of the biggest challenges that beginner investors face and how you can overcome them so you can get in on the action.
There Is Risk Involved
This first challenge is often enough to turn beginners away. The fact that investing can carry a lot of financial risk is scary, but it’s worth noting that some investments are much less risky than others. Learning simple investment strategies can make all the difference in the world, as you’ll feel better prepared to make decisions.
As a beginner, it’s often smart to start with small investments that won’t hurt if you lose them and to keep the strategy very simple. You can build on it as you grow more confident. It’s also smart to spread your investments around—as the saying goes, “Don’t put all your eggs in one basket”. By doing so, if one investment doesn’t work out, it doesn’t mean you’ve lost it all.
There Is Never a Perfect Time
A common excuse beginners have for staying on the sidelines is that it’s not the perfect time in terms of the market. If this challenge is holding you back, think in terms of long-term investment. This means you’re not worried about getting a return tomorrow; instead, you show patience and trust that the market will go through ups and downs.
Making Things Too Complicated
Diversifying your investments is a cardinal rule that experts try to impress onto beginners, but there is such a thing as over-diversifying. If you spread your investments too thin, your returns may not be as big as you hoped. So, what’s the perfect number to aim for? Many investors suggest investing in two to three options at a time.
You Don’t Have Enough Money to Invest
Another challenge is not having enough money to make an initial investment. While beginners often think that investments need to be big, the fact is that not every investment is going to cost big money, as there are smaller ones you can make. Again, it comes down to doing your research and looking into the costs.
Don’t Feel Confident Investing? Brush Up on Some Key Terms
Doing your research should also include brushing up on the key terms. There’s no need to become an expert right out of the gate, but knowing the basics will prove very helpful. Understanding these terms will make it possible to make more advanced investments or those that require some tracking and knowledge on your part.
A great example is keeping track of short interest, which refers to shares that are being sold ‘short’. This can prove to be a wise investment strategy if you understand what’s involved and the basics of when to buy and sell.
Thinking You Don’t Need Help
The final tip is directed at those who like to go things alone. As a beginner investor, you simply can’t know everything right away. It’s important to know when to ask for help, and who to go to for that help. Using a broker can be a great way to learn about investing and making less risky choices.
Feeling cautious about when and how to enter the market and invest is smart, but don’t let it hold you back. At some point, it’s important to face your fears and meet the challenges head on.