If you haven’t noticed over the last few years, the stock market has been a roller-coaster of ups and downs. When the market is up, people generally ask me to help them invest and when it is down, they want to sell, sell, sell.
The first thing anyone needs to do is understand how the stock market works. There are some great articles on how the stock market works on the internet.
How do you ride the stock market coaster?
The first thing you need to do is be ready for the ride, because it will be bumpy. Throughout history, the markets have gone up and down, but the most important thing to do is to stay on the ride. If you get off as the market coaster is going down, you could get hurt financially.
I know it can be hard to stay on as the coaster comes tumbling down, but for some, it could be better to stay buckled in -- but it is ok to scream if you feel the need!
Pick a ride and stick to that ride for most of your time in the market
One of the biggest keys to the market is to pick a good long-term investment strategy. If you ride one ride for a short while, get off and try something else, it will generally cost you more in fees, while also losing time and potential profits. The one way to invest is to pick the best ride for you and stick with it -- if you are young, be aggressive and ride the super twisty coaster; if you are older and close to retirement, then ride the teacups or maybe the Ferris Wheel. Whatever you do, it is best to pick a long-term strategy and make changes slowly over time.
Once you pick the ride, ride it and do it often
In the investment world, there is an investment philosophy called dollar cost averaging. This is where you invest the same amount of money every week, month, or quarter into the same funds. When the market is high, you buy less, and when it is low you buy more. By doing this over a period of time, this strategy may get better value. Dollar costing average involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets. Doing this generally saves time and makes investing easier and simple.
Remember -- the markets will be a crazy coaster ride
The markets will be crazy and will be a roller coaster, but if you understand the markets and do these basic things, you may see great benefits. Yes, you will probably scream at times, but the returns may be worth it in the long-term!