I received the following investing questions from the subscribers to my email list. I know many of you share these common questions, so I’ve included the answers for your benefit here.
Investing questions #1: My biggest frustration with investing is getting started in an investment worth investing in. I have thought of investing in the stock market but haven’t yet. Please help.
It’s good that you are selective in wanting to start. When it comes to investing in the stock market, it’s much better to be cautious than to be careless.
Let me try to help you ease your concern. The majority of your investment return will not come from just one investment. A well-diversified portfolio should hold around 20 individual stock positions.
That’s not to say you have to build all 20 at once. As a beginner, it’s completely fine to build one position, and then another one, and then another one as time goes by.
The first investment you make is important in the sense that it helps your confidence. Other than that, the results of this investment will not be substantial in the long term. It will be the consistency of your investing, and the fact that you are adding positions monthly that will compound your wealth and give the results you seek.
When it comes to finding an investment, I highly recommend researching about value investing. A well-diversified portfolio of value stocks tends to outperform the market average if done correctly and with the right principles.
So bottom line, don’t let your frustration cripple you.
A mistake in the beginning with your first couple of investments won’t kill you. The decision to stop investing will.
Investing questions #2: I’m brand spanking new to investing. What frustrates me the most at the moment is my lack of knowledge and a plan of action. Also, I represent two minorities in this area and have no one in my “circle” of friends or family that have the same interests I do. Hopefully you can help me get started. Continue reading