Intelligent investors are always looking to learn new things. The stock market can’t be perfected, which means that there are always new strategies to practice and habits to adopt. Even the world’s most successful financial traders would back this up, even if they’ve developed some of their own methods to get where they are today.
Keeping all of this in mind, we wanted to briefly cover a few steps you can take to be a more effective investor. These tips don’t deal with charts and numbers so much as habits and psychological strategies, but they can help you to manage any money you might have in investments more effectively all the same.
1. Learn Assets, Not Charts
Don’t misunderstand this as a claim that it’s not necessary to learn how to read patterns and charts if you invest in the stock market. Rather, it’s an assertion that learning about the actual asset or company you’re investing in is the foundation for good financial decisions. Legendary investor Warren Buffet has made this claim, saying that people should buy into businesses they understand.
As he explains it, you should think about each asset as if you were going to put your entire family’s net worth into it. Does that inspire confidence? Or would you prefer to find a business or asset you know more about? This is a simple thought process that should guide you through investments, but also inspire you to learn more about a broader range of assets.
2. Keep A Trading Journal
Commonly recommended for forex traders, but helpful for any type of investor, a trading journal is a tool to help traders learn from past successes or failures. It’s not a complicated idea, but it’s one that more investors ought to be taking advantage of.
There aren’t exact standard parameters for a trading journal, but the idea is that it’s a log of buying and selling activity that can help to illuminate one’s own habits for purposes of learning and improvement.
3. Guard Yourself From Advice
This doesn’t mean that advice is bad, but it does mean you should judge each tip on its own merits. Venture capitalist Mark Cuban has made the point before that if a broker could make every client a millionaire, she’d be charging a lot more.
A lot of people who speak from a position of expertise in finance may not necessarily be experts on your own situation—or even in general. Advice is invaluable given the aforementioned fact that investors should always look to learn new things, but you still need to be careful about who you listen to and when and why.
4. The Market Is Wild; Stay Calm
Finally, don’t get hung up on volatility. Financial markets are always moving, and a lot of inexperienced traders and investors can become frustrated trying to track movements and time their transactions perfectly. The longer you stay involved with this sort of financial practice, the more you come to understand that the markets are always volatile and wild. The most important thing you can do as an investor is to keep calm and carry on.