News of a potential vaccine for Covid-19 sent markets soaring. Over 12 million new accounts have been opened at major investment firms since the virus hit last March. To prepare financially for the next big calamity, even more folks want to get into the stock market. However, many first-time investors end up disappointed. Several mistakes newcomers make include:
- Buying shares when the market is on a roll. That’s when most stock prices are highest.
- Expecting over-night results. Investing is not a get-rich-quick scheme. Results take time.
- Selling too soon. Most experts agree that investing is a long-term venture. Wait it out.
Over the years, investing in American companies has delivered great results, according to Warren Buffet, the nation’s No. 1 stock market guru. “It should be easy to earn juicy returns,” he declared in a newsletter to his Berkshire Hathaway shareholders a few years ago. “Instead, many investors have experiences ranging from mediocre to disastrous.”
INDEX FUNDS. Buffet advises newbies to begin with index funds, a type of mutual fund or exchange-traded fund (ETF) with a portfolio similar to dependable, diversified stock groupings, such as Standard & Poor’s 500 Index (S&P 500). Most successful investors agree with Buffet that it’s still possible to make money in the market. Those who are new to the game should observe just a few Dos and Don’ts:
DO: Start out with good advice from a trusted financial planner in your neighborhood. Many novice investors think that all it takes to get rich in the market is to buy hot stocks today and sell them tomorrow. They jump into investing when the market is on a roll, paying high rates per share, rather than waiting for better prices. A reputable advisor knows the market and what you should pay per share.
DON’T: Follow the crowd. Once a certain company is widely known to have been a good investment, its shares are already quite pricey, or too steep to make a nice profit at that point.
DO: Keep an eye out for future trends. Anticipate the next big need before too many other people become aware of which products or services will be in demand next. Example: Successful stock-buyers looked to pharmaceuticals early on . . . when they realized that the world would need a vaccine to escape Covid-19.
DON’T: Pay too much per share. Buy low. It pays to know the history of a promising investment. How high has it gone over the past year or two? How far up could price per share still go? A financial advisor who follows market ups and downs can help you make good decisions on how much to pay per share.
Manage Your Money . . . financial facts for a brighter future provided by Advancd Asset Management LLC
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Ronald Van Surksum, CFP
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