Over the long term, investing in the stock market tends to produce returns that no alternative can match. Despite that, many investors feel nervous about stock market investing, sometimes even to the point of remaining on the sidelines.
That will always be better avoided, and there are some effective ways to become more comfortable with this type of investing. Heed the following four tips and your fears about stock market investing should recede and allow you to join the party with confidence.
1. Be Proactive About Learning the Ropes
Many investors today confine their stock-related investment activities to buying and holding funds that track indexes. One of the most common reasons for doing this is being unsure about how to specify and place orders for particular stock issues.
Online platforms like TradeZero make it easy to get over that hurdle, with training options abounding. Watching even a few videos at such a website can equip a novice stock trader to handle all the most common situations.
Unlike people who stick to exchange-traded funds, for instance, investors who buy individuals stocks need to be adept with placing limit orders. Learning about all the most basic types of trades will go a long way toward putting many of the most common market-related fears to rest.
2. Experiment Before Becoming Committed
Few experts would recommend that inexperienced investors allocate entire portfolios to positions in individual stocks. Many people who have not yet made the leap to this type of trading, though, act as if that were the only option.
In reality, you can just as well make modest trades while you are becoming comfortable with this type of investing. With commissions on stock purchases and sales now being so low or even nonexistent, investors rarely need to worry about fees eliminating their returns.
Experimenting with various types of trades and strategies will always make the stock market seem less fearsome after a while. Devote a small portion of your portfolio to this type of activity, and you will become a more confident investor before long.
3. Have a Strategy and Stick to It
Many investors who think about investing in the stock market hear stories about day trading and become overly intimidated. It is not necessary to trade especially frequently to generate returns that are worth bragging about.
What matters more, in general, is that you develop a strategy that suits your situation and can be pursued for some time to come. If you decide that being young makes plenty of risk tolerable, for instance, you can focus on picking stocks that have a lot of potential for appreciation.
A more mature investor might prefer to emphasize blue-chip stocks whose price movements are more predictable. Having an appropriate, thoughtful strategy in place makes it easier to resist unjustified feelings of fear and doubt.
4. Learn to Live With Your Emotions
Just about every experienced stock market investor can tell stories of times when overly emotional decision-making produced losses. There will rarely be a reason to pay more attention to emotions like fear than the cold, calculating verdicts produced by reason.
Successful investors need to accept that their feelings will sometimes try to interfere and develop ways to respond appropriately. Even becoming able to take a step back from the virtual trading desk when your emotions flare up can produce improved results over time.
Put these four tips to use and you should feel yourself becoming less fearful about investing in the stock market. That can end up being one of the best ways to become a far more successful investor.