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When it comes to investing in the stock market a lot has been said and
written. So much so that you would think everybody would know how to manage
their money in this arena. In reality however, nothing could be further from the
truth. Even though people can easily access a wide range of financial
information these days, successful investing remains a mystifying topic for many
people. The biggest problem is not the lack of information. There is plenty of
information around for anyone who wants it. The real issue is the lack of
security and predictability, that is inherent to the stock market, and people's
ability to deal with it.
People love to be secure and in most cases they like to be able to foresee
things at least to a minimum degree. At the same time however they want to make
a profit; the more, the better. And unfortunately high profits are usually
accompanied by high risk. Feel the dilemma here? Of course, one solution to this
dilemma would be to simply put your money in a savings account, collect a little
interest and just relax. If this sounds good to you, well, good for you, but
don't bother reading the rest of this article.
Which means that if you're reading this, you're probably not satisfied with the
meager returns from today's savings accounts and you want to let your money work
just a little harder for you. But you would still like to minimize your
uncertainty right? Let me give you a prediction with a very high degree of
certainty.
If you invest in the stock market you will inevitably:
- make money some times
- lose money some times
That should at least cover the uncertainty factor. Perhaps this sounds a bit
simplistic and if it does, good, it should. Because the point I am trying to
make is very simple. You just can't make money every single time you make a
transaction. Even Warren Buffet did not make money on every investment he has
ever made. The best investors and traders in the world lose money on a certain
number of their transactions. So don't get too hung up when it happens to you.
Fortunately it's very hard to lose money every time you invest. Perhaps you
could find some people who claim that they lost on every investment they've ever
made, but chances are they are not telling you the truth. Even they have made
money on some of their transactions. However they probably re-invested that
money into other stocks that ended up losing money. It's a lot like the guy
sitting at the slot machines. After playing for a while the machine starts
chucking out a whole bunch of coins resulting in a nice profit. But instead of
calling it a day and taking his winnings home, the guy simply keeps pouring
money into the machine until the very last coin. Then he goes home wondering why
good luck never comes his way.
It's important to face the reality of losing some money from time to time and be
ok with it. This does not mean that you should feel ok every time you lose
money. Your goal should always be to make a profit. Just be aware of the fact
that you can't realistically expect to make a profit every single time. This
will ease some of the fears of failing, since losing money on an investment
doesn't mean you have failed as an investor. Many people never get started just
because they're afraid of losing money. And if they do lose money, they feel
they have failed and retreat from the stock market in its entirety, never to
return again.
If this hasn't happened to you personally yet, just look around. Can you
remember a time when either a colleague or a relative would frequently inform
you of their investments? Just about every time you bumped into them they would
tell you how good their stocks were doing and how much profit they were making.
And then, all of a sudden, they completely dropped the subject. You never heard
them talking about it again. And if anyone asked them how their stocks were
doing, they would either mumble something inaudible or utter some kind of
defensive statement. What happened? They lost their money and withdrew from
activity in the market. They have essentially given up, and in doing so, they've
lost. Not because they lost money, because they gave up.
If you want to be a successful investor, you can't be like that. The though of
giving up can pop up in your mind when things don't seem to go your way, but you
should never give in to it. When it comes to success in investing your attitude
is more important than your knowledge, just as in many other areas of life. Now,
I am not saying that you don't need knowledge. You should try to learn about
investing, at least enough to get a basic understanding of how the stock market
works. Neither am I saying that it's ok to be an idiot and not learn from your
mistakes. You should learn from them, as much as you possible can. Just realize
that you will not be right 100% of the times and as long as you're investing in
stocks you will not be able to prevent making mistakes.
So before you put your money into the stock market, or any other investment for
that matter, remember this: You will win some and you will lose some.
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