Investing is an emotional roller coaster if you’re new to the rules. One day you’re up and flying high; the next, you’re dropping a few points and waiting for it to bottom out.
It makes you wonder how these professional investors make it through their first year and then keep on going!
The truth is that it’s really a mind game. Once you learn the skills to master your emotional reactions, you can cope with the ups and downs of investing easily.
Use these tricks to get you through your first few roller coaster investing moments.
The Mind Tricks Serious Investors Use
Have you ever gotten so skittish with an investment that dropped that you sold it immediately? Then regretted it when it soared soon after?
Serious investors, like those who follow journeytobillions and other major investment sites, know how to ignore their initial stomach drop at a financial loss and wait for the rise that may follow. Here are a few tips that may help you do this, too:
1. Check the return on your investment first
Early returns are a fickle thing. If your savings rate is low, it’s not going to make a big impact on your final payout. So while it’s important to know what your investments are doing, it’s not important enough to do anything about them. Your savings rate, in the long run, is going to exceed your investment.
Instead, focus on slowly increasing this rate. Start small if you must, and then add more as you can. This will be what makes the biggest difference over time.
2. Know how well you are diversifying
The phrase “Don’t put all your eggs in one basket” couldn’t be phrased better when it comes to investments.
Seasoned investors know that the safest way to put their money into investing is to spread it out. If you’re not diversifying, one hard hit is going to be potentially devastating.
To ease your mind, make sure you allocate what you’re investing into a wide range of categories. Stocks, bonds, international stocks and bonds, and index funds, for example, cover a wide enough asset allocation that one or two drops isn’t going to hurt as you wait out the loss.
3. They have a backup plan
When you invest, you are taking a risk. As with any gamble, the wins may well outweigh the potential losses, or they may backfire.
The important part is to not invest what you can’t afford to lose, or to have a backup plan if you do.
Have a strategy ready to go when things are up and when they’re down. Stick to those strategies, no matter how tempting the exit may look.
Keep part of your investment in cash and gold, if possible, and when the market tanks, you’ll be able to ride it out longer.
Keep Your Head in the Game
Making decisions based on emotional reactions is a fast way to lose your investment, or lose out on a solid profit.
As an investor, you need to think rationally and logically, not based on instinct and fear. These three tricks will help you cope as your investments waver and deviate from your original plan.