As with so many things in life, it’s important to be ready to invest before you do so. Jumping into the stock market without thinking about it is not a plan for success, just like sharply curbing your eating without learning more about weight-loss methods isn’t the best way to go about trying to lose weight.
Losing weight and getting better with money are two popular New Year’s resolutions. You’ll have to decide for yourself if you’re ready to try to lose weight, but here’s a look at five signs that you’re ready to invest.
1. You have a long-term focus
It’s easy to say you understand that it’s important to invest for the long term, but it’s not always easy to walk the walk. I’ve blundered along these lines, myself — for example, buying into a company that seems poised for great things, but then selling out of it after a year or so of underwhelming performance or even sooner if some other exciting company caught my eye.
I’m a much more patient (and more successful) investor now, but if I were to look at many stocks I sold years ago, I’d see how much in growth and profits I missed out on. For best results with long-term investing, aim to hold on to stocks you buy for at least five years, if not 10 or 20, as long as the company remains healthy and growing.
2. You know what to expect
Before you jump into the stock market, be sure you have proper expectations. For example, expect volatility. The stock market has gone up, up, up over more than 200 years, but it hasn’t done so in a straight line. There will always be corrections, crashes and economic recessions. They are often, but not always, short-lived, so you need to be prepared to wait years for a recovery.
Remember that the best stocks have gone through downturns and periods that disillusion investors…but then have gone on to reach new highs. Patience tends to be rewarded. Acting on your own fear and greed, not so much.
Also expect to have to keep up with individual stocks you own, following them in…
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