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đș MUST READ if 2025 is Your First Year Investing...
Here are 7 principles new investors fail to understand:
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Is 2025 your first year investing?
Here are 7 principles new investors fail to understand:
1 - Never Interrupt Compounding
Investor returns thrive on the compound effect.
You're not getting anywhere if youâre buying and selling after every news headline.
Pick stocks with timeless principles and hold them for decades.
2 - Save Before Investing
Investing is heavily romanticized in our culture.
Everyone wants to start investing immediately to see returns.
However, the truth is you NEED to save before you invest.
Otherwise, youâll have no money to invest in the first place.
Dollar-cost averaging a percentage of your paycheck is great.
But having a piggy bank to funds whenever thereâs an opportunity is ideal.
3 - Devilâs Advocate
Play Devilâs Advocate every time youâre making an investment decision.
That forces you to think critically and avoid confirmation bias.
We naturally seek information that supports our beliefs.
Donât let this happen to you.
4 - Fight The Fed
Thereâs a saying that you should follow the Federal Reserve's policies as an investor.
Ex: When the Fed cuts rates, buy stocks, when the Fed hikes rates, you should sell.
Iâd argue that with the correct time horizon, the Fed's policies arenât important.
Regardless of the Fedâs actions, stocks will rise in the long run.
Just buy great companies, and youâll be fine.
5 - Expect Crashes
If youâre a long-term investor, a 30% crash is something to expect in your career.
Mentally preparing for it now will keep your hands steady and prevent you from panic selling.
Always expect the unexpected.
6 - Signals & Noise
Learn to distinguish between signals and noise in the market.
Signals are relevant and meaningful pieces of info to help you make informed investment decisions.
Noise is unverified speculation or exaggerated headlines that cloud your judgment.
7 - Volatility
Depending on your risk tolerance, donât be afraid of market volatility.
Volatile investments have the highest potential for returns.
Volatile stocks have entire financial products built around them.
Such as call-and-put options, leveraged ETFs, etc.
Thanks for reading!
Investing is the only career path where you can directly monetize your thoughts.
So, make sure to educate yourself before getting started.
Then, reap the rewards for decades to come.
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