A lot of people tend to think that investing money is not for them, but only for the extremely rich or those who understand everything about the economy. Furthermore, some believe that investing is too risky, probably because they heard too many horror stories about stock market crashes. But the truth is that investing can be good for everyone, and as long as some basic rules are followed, and you are careful, that will be a journey you will enjoy. Even more, not only enjoy but profit from it as well. And what is even more amazing about it is that nobody has to invest millions of dollars.
Naturally, never invest money that you can’t afford to lose, but ideally, we would like to find a way to invest money without the risk of losing money. So if you are interested in learning more about investing and want to read up on what experts think, just check this. But if you would first like to read a bit more about investing in the stock market without losing money, simply continue reading.
When do we lose money?
The first thing everyone needs to comprehend is when we are actually losing money. So let us say you bought stock worth two hundred dollars. If it falls in worth to one hundred dollars, that doesn’t mean the money is already lost. The vital thing in stock trading is not to panic. Just because something is decreasing in value, it doesn’t mean that trend will continue. Only once our stock is sold have we definitely lost the money. Naturally, it is the same with earning money. Until the stock we sell the stock for more than we have bought it, we haven’t made any profit. Fear is our worst enemy. Watching our stock decreasing in value is normal, and no one should dread it and sell everything in a rush.
Another misconception that exists is connected with portfolios. So when dealing with portfolios, don’t be obsessed over how every particular stock is doing. A decrease in the value of a singular stock might be covered somewhere else. So keep in mind that what is really important is the loss or gain of the entire portfolio. After all, that is why portfolios exist, because it is impossible to predict the future and know how every single stock will do in the future.
Playing the long game
The best way to make sure that we don’t lose our investment is to be in it for the long run. A long-term investment is a sure way to make a profit, and that is a fact confirmed by all of the data. Whatever risk exists, the longer we stay in the market, the more we reduce those risks. Some people try to trade for a couple of days. They force their hand and often lose money. Even investing for a year or two can be risky, although that completely depends on the year in question. But when the data is analyzed, we see that people who have played the long game and traded for over five years rarely or never lose money.
Of course, there are periods that are more profitable than others, but that is not up to us to decide. What we do control are our mindset and determination. The facts are that the less we are focused on getting rich fast, and the more we are ready to stay for a long period of time, the lesser are the risks we are facing.
Consider the real estates
Investing in the stock market is generally always a good idea. The problem used to be that this was one of the more expensive ways to invest our money, but not anymore. Today, you have something that is called real estate crowdfunding, which is offering us an opportunity to invest with others in actual physical property. You could say that the best part is that you don’t even have to be a landlord. While this is still a larger investment than some other ones, and you are putting a lot of money into one property, there are still some advantages to this approach. Even if the stock market crash, you are still a part-owner of some actual building. That means that our investments are having some guaranteed value that no one can take away from us. If nothing else, investing in real estate is a great way to diversify our assets, and that is always a good idea.
The margin of safety can be vital
Probably the most crucial method of reducing the risks is buying stocks when they are undervalued. If you think the problem is understanding when they are undervalued, you are mistaken. The problem is finding them. The way we use to determine if a stock is undervalued is to check its price-to-earnings ratio. If it is less than fifteen, that means you have found a good opportunity to invest. To succeed in that, we have to be patient. Most companies will have this ratio between ten and thirty, so buying stock from a strong company but with this ratio close to thirty is not going to make us any profit. Buying stocks of some small bad company just because they are cheap and fulfill our price-to-earnings ratio requirement is not a good idea. If that company is bad, their stock is not going to rise anyway. While it may look hard, patience is the key to this approach. Buying the right stock at the right moment is essential to guaranteed profit.
As we have seen, while it is not impossible to trade with stocks without any risks, there are still things everyone needs to understand first. While following investment guides and rules is vital in investing, but it is only just the beginning. Investing the money you can spare, being patient, not panicking, and diversifying your assets are all the things that will enable you to invest in the stock market without losing your money.