1. Be comfortable being uncomfortable
When I turned eighteen, I invested in my first company ever. I was so excited so naturally, I watched the price every single day. Then, the second I saw the nearly twenty percent drop, I sold it all. If I would have held, I would be up almost three hundred percent now. I tell you this story to (hopefully) share a laugh but also to show that sometimes being uncomfortable is okay. That is an important lesson in the stock market especially when the market is in a downturn. If we can keep our emotions aside, we will always end up better in the long run.
2. Invest for the Long Term
When I was a kid, the long term was a week, when I started investing, the long term was five years. Now, when I think of long-term investments, I am thinking by the decade. It is scary at first, but this is the mindset you need to have when you think long-term, investing for the next decade, not the next month. The longer you leave your money in the markets, the longer it has a chance to grow. Historically, the market will always come back but you have to let it.
3. Learn the importance of delaying gratification
You have to understand the power of money, $1,000 spent could be $10,000 in a few years. I’m not saying to never spend any money, everyone likes to have new things, but if you can learn to delay gratification, you can grow your money. A good rule is to buy everything twice, if you are spending $100, invest $100. Of course, this does not apply to necessities, but it will make you think a little bit harder the next time you decide you want something.
4. You will lose money.
Of course, stocks can only go up, right? Well, over the long run this seems to be true, if you have the patience the market will reward you. However, sometimes stocks go through a down period. Just remember that throughout history they have always come back eventually. If you are worried, take a break from checking on your portfolio for a day or two. If not, you can see this as an opportunity to buy all of your favorite companies on sale.
5. There is a reason behind the stock price.
When looking at stock prices for the first time, or even the 100th, that cheap stock always looks appealing. Why would I buy a stock that has a price in the thousands when there is one for a couple of dollars? Well, remember that stock prices are relative, and they earn their prices, good or bad. So maybe that five-dollar stock is cheap, but that does not mean it is going to perform like the expensive ones. This is a perfect time to tell you about one of the less joyous parts of investing for most people…
6. You need to do research.
I understand that not everyone is as awestruck with the power of money and finance as I am, so research may sound intimidating or simply boring. Sometimes even I hate it, staring at charts and numbers for hours to try to make sense of the chaos seems impossible. Remember, picking investments is a process that takes time and patience.
7. Learn the importance of a good ETF or mutual fund
I know, research sucks, but maybe there is a way to avoid some of the work. It is much easier to let someone else do the work for you. If you decided the whole research thing is just not for you, try picking an ETF or mutual fund that mirrors the S&P 500. For the average investor, this is the way to go. If you aren't able to keep track of a bunch of individual stocks, there are so many options that allow you to invest without the hassle or fear.
8. Don’t let the money affect your mood
The market is like a rollercoaster, you start by going up high, but you have to remember the drop is coming, and it is scary. The stock market and the rollercoaster have a lot in common, they both experience ups and downs. The good thing is that they always come back up. So, when you get to the top of the rollercoaster and look over and see the drop coming, remain calm, it won't last. Everything will eventually come back up, and even though the drop is scary, everything will be fine in the end.
9. Live below your means
What does this mean? Well, if you make $100, spend $75. This is the way to wealth, a man that makes $100,000/year but spends it all is less wealthy than a man that makes $50,000 but saves $20,000. Those savings can be invested to accrue true wealth that cannot be achieved when you are spending all your money. Living below your means is the best way for most people to become wealthy. If you can have enough discipline to save and invest, you will be better off for it.
10. Money is a tool.
Kevin O’Leary once explained that he envisions his money as being a soldier, he sends it into battle to “take currency prisoner and bring it back”. This is the most perfect example I could think of to show that money is a tool, you have to learn how to use the money that you have to make more. Who better to learn about money from than Mr. Wonderful, right? He has certainly done a good job of investing and using his money to get more.
11. Create a plan to track your spending
We all know when we have had a week where maybe there have been a couple of extravagant purchases, or maybe small things build up faster than you thought. One thing that I have learned is to force myself to look at my bank account. If you ignore the purchases, they start to build up faster than intended. Then, track every dollar you spend. Once you do that, you will be able to start budgeting and creating a plan for every dollar in your bank account. This will help you to start saving, investing, and making the most out of every dollar you have.