Becoming a Seasoned Investor

From the conservative saver to the aggressive speculator, most people agree that a smart, long-term financial plan requires finding ways to make money grow. And like most financial decisions, there’s no single, best way to do that.

Becoming a seasoned investor means getting to know yourself—your goals, your motivations, your fears, your limits. This guide will help you understand these things and how they mesh with the fundamentals of investing.

Get a Handle on the Basics

You’re probably familiar with the terminology of the investing world—or have at least heard the words before. Stocks and bonds. Commodities, real estate, and forex. Brokers and robo-advisors. Active and passive. You don’t need to be an expert in all these concepts to become a good investor. In fact, waiting until you feel like you “know enough” to invest could keep you on the sidelines, missing out on potential gains because of fear.

That fear can take lots of forms: fear of risk, fear of losing liquidity, or simply the fear of making the wrong decision.

Here’s an example: Only 37% of adults younger than 35 put money in the stock market in 2017 and 2018, according to Gallup. That’s down significantly from the 52% of the people in that age range who invested in the market in 2006 to 2007. The financial crisis clearly, understandably, damaged most people’s confidence in the market.

But while older investors (35 years and older) have stayed in the mix, younger people have kept their money out of stocks. Both groups view stocks as the second-best long-term investment after real estate, but only one group heavily invests in them. Why?

Fear isn’t the only driving factor behind those numbers, but it can explain a lot. Young Americans have only seen the effects of one major downturn. Older investors have gone through ups and downs before, so more of them have stuck with investing in the market. And, as the Gallup report puts it, “that approach has appeared to pay off.”

Taking the time to educate yourself can help alleviate the fear that many investors or would-be investors feel when trying to make financial decisions.

Form a Strategy

The next step involves setting some goals and using what you’ve learned to make plans for reaching those goals. This will look different for everyone, and important as it can be to follow the age-old investment advice of “stay the course,” that doesn’t mean you can’t ever change your mind.

This guide describes a variety of strategies you might choose. As your goals change and you learn more about what works well for you, you might shift gears and try different tactics. Don’t skip over learning an investment approach just because you think you might not be interested in it right now.

Learn to Adapt

Overconfidence can be just as damaging to your portfolio as fear. Even if you want to take a less active role in your investments, you still need to evaluate the effectiveness of your plan from time to time. As you work through this guide to investments and strategies, don’t forget about the big picture: You’ll have to weather downturns at some point, and what works for you at age 30 won’t necessarily make sense at age 60. Learn now what you’ll need to do later on, as a seasoned investor.