The financial crisis and the painful recession are behind us now. Although the unemployment numbers are still very high, there are many reasons to believe that things will soon start improving on that front too. These have been major events, and it is important to learn from them as an investor.
If you were invested in stocks just before the collapse of the stock market, you would understandably be skeptical right now. Many investors lost their faith in the market and have refrained from investing since then. But you have to put your money in some assets, and as the rebound in the stock market since March 2009 has showed, if you time your investment correctly there are still some great opportunities to earn profits. Here are some lessons that you should take away from the crisis to become a better investor.
Don’t Panic
When the stock market was at its lowest levels in 2009, almost everyone had a pessimistic outlook. More bad news was in store, we were told by the so-called financial experts. But investors who were able to shut out the noise sensed an opportunity and their investments have grown by more than 60% since then. The important lesson is to not go with the hype. Analyze the satiation with a calm mind and try to find opportunities.
Think Long Term
Anyone who tells you that you can make assured quick money in the market either has no idea of what he is talking about or is simply fooling you. In the short term, the market is nothing more than a casino. You’ll win some, you’ll lose some, and then you’ll realize that it was a total waste of time. Keep your investment horizon long term. Treat your investments in good stocks as an asset and not as a bet. You should target modest but assured returns instead of going for risky investments.
Diversify
One of the oldest tenets of investing is still one of the most important. When you invest, you should never concentrate all your risk in a single stock. By creating a diversified portfolio, which also has bonds in it, you spread your risk. So if the price of one of your stocks collapses, you would still be able to make up for that loss with profits from other stocks.
Keep these tips in mind and be smart about your investments. Don’t make investment decisions because they feel right, you need to think them through.
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