Remove fear of losing and start investing

 What many non-investors are afraid of are:

• Emotional fear of failure (“I’m going to look like an idiot if I fail.”)
• Rational fear of failure (“I don’t want to lose all my money.”)
• Fear of people taking them for a ride or a fool (“These brokers are just smooth-talking me.”)
• Fear of appearing ignorant when they don’t understand (“When it comes to a short and long position, I don’t get the long and the short of it.”)

These fears are all valid and it makes sense that people don’t want to make costly mistakes in anything.

The great news is there are a few tips and tricks you can use to remove any “fear-based” obstacles and eventually become a successful investor.

Do Your Homework

Being a financial arena, this one has its own jargon, with many of its terms sounding too technical.

To experienced traders and investors, the terms are natural and clear – but for an inexperienced person, it can seem like a language from outer space.

After all, who can understand things like “stop-loss order”, “forward contracts”, “arbitrage”, or “pink sheets”?

It’s frustrating when the people you turn to for advice use words and terms you have no idea of.  This wall of jargon boxes the insiders in and keeps the outsiders out.

To jumpstart your own lessons, you could buy some helpful books or take a class at your local community college.

Or, you can educate yourself for free by turning to the Internet.  For example, Investopedia has a lot of materials and simple user tools.

These include a glossary of investment terms that explains more than 8,000 items to help you strip away the mystique of the investing jargon.

You can also search for hundreds of personal finance blogs that contain volumes of information about the market, how you can start investing and tips on how to succeed.

Have A Plan

Before starting to invest, sit down and write your goal and timeline.  State what you’re investing for and when you think you will need the money back.

If you anticipate that you’ll need money within the next three to five years, preservation should be your top goal.

Put your money in a safe and accessible instrument, such as a money market mutual fund or a high-yield online savings account.

A bank certificate of deposit could also be a good option.  Just remember that you’re locking in your money for the term of the CD and you might pay a fat penalty if you cash out too early.

If you have a longer time,grow your income,InveInvestst in a broad-based mutual fund that has a large stock portfolio.  In case anything happens to you, you can cash out anytime.  The downside is, you’ll have to pay taxes on the profit that you’ve made.

Start Small

If you have a ton of money to invest but not enough courage, try some baby-steps by investing a small portion at a time through dollar-cost averaging.

It’s quite simple.

Take the total amount you have (say $12,000) then divide it by the number of months you plan to invest (let’s take 12 months) and invest that amount at the same time each month ($1,000 per month).

If you hit the market on a good month, you will be able to afford a lesser number of shares.

If the market has a bad month, your $1,000 will buy you more shares.  This way, there’s no need to worry about getting the timing perfectly.

As you spread your money over a year (or more), you lessen the risk of losing a lot of money when an immediate downturn happens.

Keep It Simple

Investment terminology can be downright disconcerting.  Diversified Investment.  Investment mix.  What do they mean?

You can make use of these things in your investment journey without having to get a master’s degree in business by investing in simple instruments such as a target-date fund.

Target-date funds are almost always mutual funds so therefore, the fund managers diversify the investments.

What they do is take the money you invest and spread them out by investing them in multiple types of stocks, bonds, and other investments.  They will also handle the asset allocation for your investment.

Depending on your needs and age, the fund managers will design the investment portfolio with a suitable mix of stocks and bonds.

As you grow older, the managers will even adjust the mix for you and at some point, they will begin to favor the allocation more toward bonds rather than stocks.

This is to make it more conservative (and less risky) as you approach your desired retirement age.

It is natural for you to be a little averse towards stocks because of the country’s last bear market.

However, the market continues to be the best source of many people for the opportunity to build wealth. The steps you will learn here should help you go back into the investment water with renewed confidence.

Diversify Your Portfolio

Some investors make the rookie mistake of favoring just one company stock or investing in one particular kind of stock (for example, airline stocks).

You don’t want to do that because in case anything terrible happens to the company or industry, you risk permanently damaging your savings goal.