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Thinking Like an Investor: Making the Shift


January 30, 2023 ( Newswire) You've done all the research on investing, and you think you're ready to take the plunge. Or maybe you've already started, but you're not getting the results you hoped for or expected. It's important to understand that there's more to investing than just reading up on how to do it, as important as that is. A successful investor has a certain mindset. Fortunately, just as you can teach yourself how to succeed in the stock market, you can teach yourself this mindset as well.

In Control of Your Money

Too many people think of money as something that is out of their control. They have it, or they don't have it, but whether they will always have it or have enough now is something that's beyond them. You understand money as a concrete thing that is within your control even though there is some uncertainty about what will happen with the choices that you make. You also know that you will have money in the future because you're making wise choices now. It's a good idea to make sure you really are in control at the start of your journey. Try to pay down things like credit card debt and fund an emergency savings account. If you're still paying off student loans, look for a student loan refinance, which can lower your expenses and possibly how much you pay for the length of the loan.

Consider Yourself a Business Owner

There's something heady about buying and selling stock. It can start to feel like Monopoly money that you're throwing around. You might think this could help you make better decisions because you're less emotional about the process, but in fact, there are things to consider before making decisions where your investments are concerned. A better approach might be to take it all much more seriously and think about buying shares as taking on partial ownership of the business. This has a few different effects. First, you'll tend to research more deeply before making a move, and this will generally lead to better decision making.

Second, you'll be less likely to act rashly. Third, you'll think more about the long term rather than buying and selling frequently. While buying and selling can sometimes net you money, it's generally advised that you leave your stocks alone since over the long run they will increase in value. There's one other thing to consider when it comes to high turnover in shares. You may end up paying commission and capital gains, which could make a serious dent in or even wipe out your profit compared to a more measured and conservative approach.

Consider How You Measure Success

You might think this is a no-brainer; if the value of your investments is going up, then you're succeeding, right? But think a little bit deeper. Look instead more closely at the companies you've invested in and whether they are making smart decisions overall. This might mean that they aren't as immediately profitable as some other companies, but over the long run, they will make more money for you. Another thing to consider is probability. How likely is it that a particular company will weather a particularly tough period and show a substantial profit over a period like a decade even if it's struggling a bit now? By looking at the bigger picture, you'll make more informed decisions about what to hold onto, what to let go and when to make a move.

Balance Risk and Reward

There are many post Covid-19 investment trends that make this a unique market. Getting involved in investing isn't the safest thing you could do. Most worthwhile things aren't, and you need to be savvy about risk so that you don't fall into some of the common pitfalls that people often do when they get too caught up in trying to become a multimillionaire overnight. At the same time, overfocusing on risk can get you in trouble as well because it can leave you paralyzed, or you'll make all your decisions with an eye to avoiding trouble.

Another way to think about balancing risk and reward is that it's having a growth mindset. You believe that you can move forward and continue to succeed as opposed to being fixed in a past where your financial decisions may not have been as wise. Set goals based on a rational understanding of the situation rather than belief in good or bad luck.

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