3 lessons you must learn if you want to become a millionaire investor | personal finance

(KaileyHagen)

Ultimately, investors have one goal in mind: to increase their wealth with minimal effort. Some do a better job than others, but the difference between success and failure is not always about how much money each person invests.

Investing large sums certainly helps if you want to become a millionaire, but there are a few other things to consider if you want to increase your wealth. Here are three of them.

1. Ups and downs are a normal part of investing

Companies have good and bad quarters, and their stocks rise and fall accordingly. The same goes for the market as a whole. Sometimes, market corrections It happens and a lot of people lose money, even experienced investors.

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One of the hard truths about investing is that your holdings will drop at some point, even if you’ve invested in large, stable companies with huge competitive advantages over others in the industry. And losing a little money from time to time doesn’t mean you’re doing something wrong, it happens to everyone.

The important thing is not to panic. Most of the time, all you have to do is wait for your portfolio to recover. In the long term, the stock Exchange has generated strong returns. Panic selling, on the other hand, can turn your temporary losses into permanent losses.

That said, sometimes Selling is the right choice.. Keep an eye on your investments and watch for red flags, such as a company constantly losing market share to its competitors. That could be a sign that things aren’t going to turn around, and you’d better cut your losses.

2. Attempting to time the market often goes wrong

Some people treat the stock market like a lottery. They invest heavily in a few small, relatively unknown companies hoping to make a fortune overnight, and that actually happens to a lucky few. But the vast majority of people who take this approach end up losing much of their initial investment.

If you want to make a fortune and keep it, you’re going to have to adjust your expectations about your timeline. Building your wealth over a few decades may not be what you had in mind, but you’re much more likely to keep that wealth if you take your time and focus on high-quality companies that offer a lot of promise.

Dollar Cost Average It’s an easy alternative to trying to time the market, and you may already be doing it in your retirement accounts. This is where you invest a fixed dollar amount on a regular schedule. It can be $100 a week or $200 a month, whatever works for you. The idea here is that sometimes you will invest when stock prices are high and other times when they are low. In the long run, they balance out and you’ll end up paying a fair price for all your shares.

3. You shouldn’t put all your eggs in one basket.

Investing all your money in a handful of stocks is a recipe for disaster, because if just one or two of those stocks go down, you will lose a lot of money. Ideally, you should spread your money over at least 25 different stocks over several sectors. This way, even if an entire industry experiences a setback, you’ll have other actions to pick up the slack.

If you don’t feel comfortable choosing individual stocks, a index fund It’s a simple way to diversify your savings. They instantly give you a stake in hundreds or thousands of companies, and most are quite affordable. the better S&P 500 index fundsfor example, it only charges about $3 per year in fees on a $10,000 portfolio.

don’t forget about rebalance your portfolio periodically too. Some investments will perform better than others, and this may result in you making up more of your holdings than you originally intended, potentially exposing you to too much risk. Get in the habit of reviewing your investments at least once a year, which will give you the opportunity to make any changes necessary to stay current.

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