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If you want to be a successful investor, there are a few key resolutions you should make. Learn more here about building wealth in 2024.
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Becoming a successful investor can make all the difference in your personal finances. And the good news is, there’s a simple path to success that almost anyone can follow.
You don’t need to be an investing guru to build wealth in the market — you just need to make three investing resolutions in 2024 and stick to them. Here’s what they are.
1. Invest for the long haul
Famed investor Warren Buffett has repeatedly spoken about the benefits of picking an investment and sticking to it. Buffett has said his favorite holding period for an investment is “forever,” and advises against buying any asset for even 10 minutes if you wouldn’t be comfortable owning it for 10 years.
Data backs up the billionaire investor’s advice. Research has shown buying and holding stocks outperforms as many as 99.8% of strategies that involve switching between investing in the market and Treasury bonds. This makes sense. It can be hard to predict when it’s the right time to buy and sell stocks — and the price of getting it wrong is very high. Missing out on having your money in the stock market on just the five best performing days between 1980 and 2022 could have reduced your returns over time by as much as 38%.
Rather than trying to time the market and potentially messing up and losing out on a huge amount of potential profits, you should resolve to buy assets with a proven track record of success over time and leave those assets alone in your brokerage account.
2. Don’t be motivated by FOMO (fear of missing out)
It’s tempting to jump onto the latest investing trend (I’m looking at you, cryptocurrency), especially if you keep hearing stories of people getting rich quickly by putting their money into it.
Unfortunately, you’re making a big mistake if you make your investment choices based on what other people are doing.
First, you don’t know their motivations or long-term investing goals, so you can’t know if their strategy aligns with yours. Second, by the time you hear about this great new investment, it could already be too late to get in at a reasonable cost since the price may have been driven up by others who didn’t want to miss out either. You could end up buying high and losing big.
Investing based on what others are doing is rarely going to work as well for you as sticking with a tried-and-true approach. Resolve not to react to the actions of others, but instead to develop the confidence to stick with a sound investment strategy that makes sense for you.
3. Keep your investments simple
There are simple ways to make money by investing. For example, the S&P 500 — a financial index tracking the performance of 500 large U.S. companies — has produced about 10% average annual returns over the last 100 years.
If you want to branch out beyond just buying index funds, then there’s nothing wrong with picking stocks of your own as long as you research them carefully and have a plan.
But, there are a lot of complicated investment products out there ranging from universal life insurance policies to fine art to precious medals to cryptocurrency (again). Unfortunately, many of these products are hard to understand, which means it’s hard to avoid losing money.
Unless you are an expert in whatever it is you’re investing in, stick to the basics. Don’t take the risk of losing by chasing extra returns through a complicated investment when you have no clear idea of how it’s supposed to grow your wealth. It’s too easy to get scammed or to suffer big losses.
Ultimately, if you make these three resolutions, you can set yourself up for a successful investing year in 2024, and many more to follow. Give these principles a try and start working on them today.
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