How to Get Better at Investing in 2022
If you’re still considering your goals for the new year, why not try your hand at improving your finances? CNN suggests a number of financial resolutions, including investing in real estate like rental properties and learning more about digital assets like cryptocurrency. These resolutions point to investing, which is a necessary departure from basic financial goals like saving.
Investing is essential to growing your wealth. However, many people lack the confidence to begin investing their money. Some who do may be discouraged after disappointing results. Reza Jalali points out some reasons people fail with investments: impatience, out-of-control excitement, or delays due to hesitation factors in. Sadly, fledgling investors are afraid to try again, even if mistakes and losses are normal. For 2022, it may be time to embrace investment opportunities. Here are four tips to get better at it:
Create an investment plan
Planning is the foundation to success, because winning as an investor doesn’t happen overnight. When you plan, you can take stock of your situation, define long-term goals, and figure out practical steps to get there. During the planning process, identify how much money you can allocate for your investments; this number should let you live comfortably, whether the markets are good or bad. You should also consider your risk tolerance while planning. If you can’t handle the ups and downs of your portfolio, you should take it as a sign to consider a less volatile mix of investments.
Grow your investing knowledge
Investing has a pretty steep learning curve, and you’ll need to do plenty of research to adequately familiarize yourself with the market. You’ll have to keep up with emerging terms, tools, and trends. Fortunately, there are plenty of resources tackling this. Books, vlogs, and even podcasts offer investment advice for beginners and veterans alike. An article on finance website AskMoney.com recommends Benjamin Graham’s The Intelligent Investor and Steven and Holly Burns’ Calm Trader, which tackle theoretical know-how and emotional control for traders respectively. Of course, do make sure you’re looking at advice from reputable sources before trying anything for yourself.
Diversify with tax-efficient investments
Diversification may seem like an overly-rehashed investment tip, but this strategy does prepare your portfolio for changing circumstances. Owning a variety of stocks, bonds, and other assets can help investors weather through risks. It’s good to diversify around and within those categories; for instance, you can expand your stock exposure across regions, sectors, strategies, and stock sizes. It’s best to diversify with accounts that offer tax benefits as well, because you would have a large investment expense otherwise. Some tax-efficient accounts are 401(k)s, IRAs, and certain annuities, or low-turnover funds like ETFs and municipal bonds.
Always review your portfolio’s performance
Research and experimentation will help you improve your investing ability, as you will learn to make more tactical decisions. You can confirm the effectiveness of your strategies by periodically reviewing and measuring results, leveraging analytical tools for new data points and performance indicators. It would be good to observe your own behaviors, emotions, and patterns when investing to uncover potential stumbling blocks as well. A study done by the University of Central Florida found that individuals who evaluated investment opportunities at a time that conflicted with their natural internal clock tended to make poorer choices; this means that if you’re a morning person, it’s not wise to make decisions at night. By becoming more cognizant of your own habits and quirks, you can smoothen out the bumps in your investing career.
For more investing news and tips do check out our other articles on ResidentWeekly.com.