Investing is one of the best things to do with your money. However, there are a lot of mistakes that investors make all the time. Thinking long-term, controlling your emotions and not investing based on what other people say are steps to become a better investor and not lose money in the stock market.
Recessions come and go, but it is important you are prepared for a recession, and can capitalise on the opportunity when stocks are cheaper. Holding cash, having an emergency fund, and paying debt, are three ways to not only prepare yourself, but benefit from a recession.
Intrinsic value of a stock tells us what the stock is currently worth. We then want to apply a margin of safety to buy a stock when it is undervalued to maximise our return and reduce our error. This method teaches you one way to calculate the margin of safety price of a stock
Dollar cost averaging is where you invest your money at set intervals over a period. Advantages include; taking the emotion out of investing, no market timing issues, and we are able to ‘set it and forget it’. However, the main drawback is that lump sum investing beats dollar cost averaging, in terms of returns, 66% of the time.
Inflation is decreasing the value of your money each year. Hence, instead of saving your money in a current account earning minimal interest, start investing to beat inflation!
Pay debt or Star Investing? Mathematically, it is best to do whatever produces the higher return. However, paying debt is likely to be the better option because of the financial and mental strain it causes.
Investing mistakes are common. There are a number of mistakes investors make, including: speculating, not understanding the company, not taking into account fees, buying/selling on emotion, and trying to time the market. Avoid these mistakes!
Whilst investing isn’t for everyone, there are several fundamental reasons why you should be invested in the market, primarily to offset inflation and grow your wealth