How to Establish Crucial Positive Habits as a Novice Investor

Jeremy Biberdorf  |


As you begin your investment journey, it may feel as though you are braving a monsoon with little less than an umbrella. Even so, it is always a good idea to keep in mind that, in investment, everyone started from the bottom and worked their way up.

This often makes early habits and behaviors learned in the formative years of investing crucial to an investor's success. This applies to all budding investors, whether you are planning to invest in cryptocurrency after college or approaching retirement. It is important to set clear goals for what you are hoping to achieve and dedicate the right amount of commitment to see them through.

You will also have the added benefit of learning from others' mistakes. A common downfall of an investor is rushing in where angels fear to tread. Investing is a marathon, not a sprint.

Throughout the course of the race, you will be hit with mood-lifting bouts of sun, closely followed by bursts of torrential rain. There will be ups and downs which test your character and discipline, undoubtedly, but your patience, will, and approach are what will see you weather the storms in the end.

These essential tips will help you on your way:

Choose Logic Over Emotion

It is easier said than done to revert to a logical approach when things are going wrong. It can be twice as difficult when things are going right.

In investing, there is often a two-headed monster just waiting to pounce at any time, depending on the situation. On one head is fear and on the other greed. When it comes to making an important choice when switching investments to cash, your decisions should be based on logic and not emotion.

This where an investment plan can help when you are considering exiting a market. Your plan should contain your strategy and goals. Adhering to it will be essential to your identity as an investor, and therefore, any success you enjoy.

Trading Too Much Will Cost You

The more enthusiastic of novice traders may find themselves simply trading too much.

This can be a bad thing, indeed. Trading too frequently will incur considerable costs in your portfolio. In long-term investment, is better to integrate balance into your financial plan rather than switching in and out of funds at a high rate.

Decide on a solid asset allocation and, instead, hold on to the stocks, bonds, and funds for the long term. Always take expense ratios into account as these can certainly build up over time and be bad for your portfolio.

Don't Try to Time the Market

While you may be smart, with a strong business acumen and exceptional dedication, guess what? There are literally millions of others who will say the same thing about themselves.

Another common misconception that investors a little on the green side make is believing they can time the market. Selling high and buying low may seem like the logical thing to do but in investment terms, it can be that delicious-looking chunk of cheese sitting idly in a mouse trap.

It may work for a short while, but eventually, you will be caught out.

Patience is a Virtue

While the lightning-speed changes in markets or the hectic pace on the floor may seem a little contradictory, patience is an essential attribute to an investor.

Investing requires time. The learning process involved has no known shortcuts, so expect to put a lot of effort into studying to make it work for you. Markets can vary considerably from one day to the next, which may confuse you at first, but with time everything will appear to make more sense.

If you are not a patient person by nature, it is never too late to learn how to be. Yes, even if you are heading towards retirement.

The Bottom Line

It is almost always true to say that starting your investing journey as early as possible is the best bet.

For many, this simply isn't achievable, especially those who need to get the money together first. What is more important to keep in mind, however, is to start the right way.

Written by Jeremy Biberdorf

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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