As an investor, it can be hard to block out all of the information available to them with regards to investing. There are many myths and misconceptions floating around that can negatively impact your financial goals. Below are 5 investment truths to achieve peace of mind and financial success.
What You Need to Know
#1 Dipping into Retirement Money Will Sink Your Plan
Taking a little out here, and a little out there, may seem harmless but in reality, it can be the death of a solid investment plan. Very rarely do people replace the money they withdraw, which means there is less money there to grow and fund your future goals.
#2 The Market Moves in Cycles
The stock market cycles through rises, peaks, dips, and then eventually bottoms out. Then it does it all over again! Understanding these types of trends is essentially to comfortably investing.
#3 Beating the Market Isn’t the Goal
Successful investors know that investing is not a get rich quick scheme, but a long-term game that is driven by solid investment decisions. Worrying or making decisions based on whether or not you beat the benchmark in any given year is not only ineffective, but may cause you to make risky decisions.
#4 Investing and Saving are NOT the Same Thing
Your investments and your savings should be two totally different entities. You should be investing for your long-term goals i.e. Retirement. Investing for the short term comes with many risks and timing hurtles that can be difficult for even the best investors to navigate. Saving for short term goals, such as buying a new car or a new house, should be a different matter entirely. These types of accounts are best suited for very safe, short term investments… not the same kind as your retirement account!
#5 You Won’t Win Every Time
Everyone wants to win. However, when it comes to investing it is unrealistic to think that you will be a winner every time. No one can see the future and therefore it can’t be predicted what a particular investment will do. Investors need to be prepared to cut their losses from time to time and not let a poorly performing investment control their emotions. Occasional negative returns are a normal and expected part of investing. It is always smart to plan for downturns instead of trying to avoid them all together.
The Bottom Line
Knowledge is power when it comes to investing. Keeping these truths in mind can help you prepare yourself the unexpected that undoubtedly comes with investing.