Jumping into the market for the first time is often difficult for beginners investing. Investing services don’t do you any favors, overcomplicating your investing decisions. They rationalize their big commissions by telling you how difficult and time-intensive investing can be for beginners investing.
If you step back and look at investing objectively, there are three keys to investing that will put you at the front of the pack, far ahead of your peers. However, investment services won’t like to hear you talking about these techniques. They are after high fees, and what I’m going to show you saves a bundle in commissions. That’s bad for them, but it’s good for you.
First, diversification is important. You can’t put all of your eggs in one basket. What if all of your money is in one company’s stock, and the CEO gets hit by a bus, or there’s an accounting scandal? You could lose a bundle. But that doesn’t mean you should diversify into bad investments, just to diversify. The best strategy for diversification is to look at fundamental global changes happening today and invest in alignment with those diverse changes. Using a set of Exchange Traded Funds (ETFs) is a great low-cost strategy that will give you instant diversification.
The second key element to understand is basic stock options strategies. Your advisor might discourage you because he doesn’t understand options, but that can’t stop you. He will tell you how complicated and risky they are. But the truth is that there are easy and safe strategies that can immediately reduce your investment risk in the market and increase your returns. Strategies that allow you to safely sell options can provide you with a monthly income above and beyond your investment gains.
Third, you have to realize that “buy-and-hold” is dead. Buy-and-hold was a strategy that encouraged you to just hold on to stocks even when they were falling, because, “one day” they will come back. Never sell anything. This investing strategy worked in the 80s and 90s when the market was predominately up year after year. But if you look at the 70s, the strategy didn’t work. Since 2000, buy-and-hold has been a disaster. If you practiced that strategy over the last decade, you might be back where you started, losing 10 years of investing returns. Don’t buy and hold! Learn to recognize significant downturns on the horizon and get out of the way, protecting your portfolio.
Using these three key strategies will allow you to trounce most investment services and allow beginners investing in the market to achieve financial success.
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