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In all honesty, playing the stock market is the last financial pastime on a lot of peoples’ minds. Most of us are content knowing our money is “safe” in our bank accounts while the stock market continues its volatile up and down see-saw ride. Despite the rough patch of the market, though, it’s inevitable that it will rebound and when it eventually does you’ll want to know smart ways to invest your money.
Rory Olson, CEO of Wall Street Survivor, has written seven tips for smart investing in the stock market. Wall Street Survivor allows you to navigate the stock market without investing any real money. As a member you receive a fictional $100,000 cash portfolio to start trading real stocks in real-time to learn how to take control of actual investment portfolios and retirement savings.
Stock Market Investing 101
1. There are no guarantees. Despite what late night guru’s might try to tell you, there are no guarantees. Investing is risky and uncertain. That is why it is rewarded.
2. Investing is not the same as saving! When you set aside emergency funds or savings accounts that is one portion of your financial planning. Budgeting is another. Investing is yet another. Combined, they each comprise important parts of your total financial strategy but never make the mistake of putting all of your additional discretionary income toward investing. Again - investing is not the same as saving.
3. Past performance doesn’t forecast the future. There is a reason a similar disclaimer is included in almost every bit of investment advice: it’s true! Unfortunately, people don’t believe it. While history can provide a great deal of insight into the probability of certain events, it cannot forecast future events.
4. Diversify, Diversify, Diversify.
5. Fundamentals never go out of style. Learn everything you can about how the stock market works and stock market investing basics. Understand the industry. Read the business section. Listen to economic data and actually read industry reports. Gather all the information possible and then use it to make your own decisions.
6. Don’t be afraid to be a contrarian. There are times when the masses are wrong. Fortunes can be made by understanding when to roll with the crowd and when to go it alone.
7. Establish a Free Online Paper Trading account at Wall Street Survivor to test your assumptions before trying it out in real life.
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