While it may not feel like it, the economy really is starting to improve. Things are looking up, and it’s the start of a new year, time to look at your investment portfolio and decide how you will gain when the economy gets better. In the past few years, the ups and downs in the stock market have been scary for some and devastating for others. Investors are still a bit panicky, and it shows in the way that the markets can’t seem to keep a steady pace. The good news is that in many other sectors, the numbers are improving, and before long that improvement will start to be apparent in the stock market as confidence is restored in the investment community.
So how can you benefit from an upturn? Do not succumb to the panic. If you want your portfolio to look great, sit tight, it will if you give it time. Stay on top of your investments, but take breaks now and then so that they can gain some value without you watching like a hawk. It’s tempting to check the numbers every day, but if you do that you probably know how stressful that can be. One day you’re up a dollar per share, the next day you’re back to the investment base rate. Maybe things go up so much you’re tempted to sell while you’re ahead, and then when you don’t, and things go south again, you kick yourself for not selling.
Stop kicking yourself! The honest truth is that over time the markets always keep trending upwards. And the coming year is poised to be one of those upswing years. Now would be the worst time to sell of stock that does not seem to be performing as well as you would like it to. If you sell low now, you’ll really kick yourself when things start to actually improve. Even if you can make $100 by selling now, wouldn’t you rather have $300 this summer?
As anyone who invested when stocks were truly low knows, time can change all things. Two or three years ago, the markets were 20-25% lower than they are now. Those people who saw a poorly performing market full of lower than expected values and bought that “crappy” stock? Well now they’re the ones who are laughing. Everyone can learn a valuable lesson from that. If you think things are never going to get better, you should stop investing in the stock market right now.
Your stock portfolio is your tool for improving your outlook as well as your finances. If you are afraid to hang on to stocks that you’ve been sitting on for a while, try to think about what makes you so fearful. Are you afraid because of something realistic, some reality that has changed the economic landscape? Or are you afraid because you think poorly performing stock is too much of a risk? Remember those poorly performing stocks in 2008? They’re now worth 20% more than they were four years ago. Holding on pays off as things get better. And by all accounts, things are getting better.
Of course, if you have stock that isn’t doing well, and the prospects for the future of the firm you have invested in are grim, unloading is not a terrible idea. The sad thing will be if you unload those shares now and find out that even though the firm isn’t doing great, the market as a whole has improved and you could have done even better if you had had the patience to wait another couple of months. Your first instincts were probably right, especially if you’ve been doing your research and waiting for the right moment to buy.
And one sure-fire way to decrease your net gain in the stock market is to engage in a lot of buying and selling in a rapid manner. Each purchase or sale is going to cost you in fees, and those fees add up, even with the best of online investment broker plans. If you have unlimited trading, you may be tempted to keep selling when you have made just a little bit of an improvement over your initial investment. Think of the gains you’ll make if you give your shares a chance to mature.
For most investors who are looking to make money by buying and selling on the stock market, the game, the stress, and the failures are what make things exciting. For the smart and successful investor, 2012 is the year to trust your first instincts. Do your research, find the right investment at the right price, and buy your shares. Then sit back and let the market do the work. Forget about your investment for a few months. The rewards will be waiting for you.