Don’t Buy Stocks If…
Investing in the stock market isn’t rocket science. You don’t have to be a genius from Harvard or a brain surgeon. But you do have to be a certain kind of person and have certain characteristics. Even though investing in stocks isn’t terribly difficult, there’s still a reason that not everyone does it. In this article I’m going to tell you not invest in the stock market if…
1. You’re in Debt
If you have any credit card debt or student loans I would pay them off before investing in the stock market. Let’s say even if you’re getting 30% gains in the stock market. There’s no point if you’re paying that much in credit card interest. Pay off your debt so you can grow your net worth
2. You Will Need the Money
The goal of investing in stocks is to create wealth and financial freedom, right? You will not be able to build and compound if you’re constantly withdrawing from it. After you pay off any debt you have and before you buy your first stock, open up a savings account. Have enough in there to cover any emergencies. Car repairs, unexpected medical bill, you need a new washer and dryer. The goal is to not have to use your stock money. It should be money that if you lost it all today it wouldn’t hurt you.
3. You Don’t Have the Temperament
I know this is a broad statement. But you have to have a certain mental toughness to be involved in the stock market. Maybe your stock doesn’t do anything for months. You get bored and want to sell it. You need to know that you’re not going to be a millionaire overnight and it takes time. Maybe the market is going through a volatile period where your stock is up a lot or down a lot. You will have to be able to handle the volatility. What if the stock market crashes or has a major correction? Are you going to get scared and sell everything? Or are you going to stay calm and weather the storm and know eventually the market will recover?
4. You Don’t Have Confidence
Confidence goes a long way in this game. If you’re not going to be confident in the companies you choose to invest in then you’re not going to make it. If you have done the research in a stock you shouldn’t care what your mom, your friend, a so-called “expert on CNBC or even Warren Buffett says about it. You’re in it to win it. You need to know that if your stock goes down in the short term, you’re confident and are willing to buy even more. You should be so confident in your stock that you actually hope it goes down more so you can get it for even cheaper. Although I think it’s good to be diverse, I think people who have 20-30 stocks or even more lack confidence. When you’re that diverse all you’re doing is missing out on big gains because you don’t have more of that money in a stock you truly love and are confident in.
5. You Don’t Have the Time
Investing in the stock market isn’t a full time job. But you also can’t spend zero time on it and expect to have success. You never want to just take a stock pick from a friend or someone on TV and buy it because they said it’s good. You have to put in a little research yourself. See how a particular company is doing financially. If they are profitable. If they have any threatening competition. WHat kind of products they have and the demand for that product. And after you buy that stock you can’t just forget about it. Jim Cramer has a good rule of thumb, One hour of research per week on each stock that you own. You have to keep up on them and make sure they’re still executing their business model properly. Or if they’re losing market share. Or maybe you have to make the decision that your stock has become overvalued and it may be time to take some profits and sell. It’s a must that you check up on your investments from time to time.
This article isn’t to deter you from investing in stocks. It’s more about giving you a checklist to go by before starting. If you don’t have any of the issues above then it can be a breeze!