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Putting Your Money To Work For You
There are two hurdles to successful investing: getting started, and staying on track. Other than that, it's a piece of cake."
Investing is easy - it's making money that's the hard part. Okay, maybe that's a little over simplified. Maybe the thing to say is, getting started in investing isn't all that hard. With some guided steps and a little practice, the two biggest road blocks are pretty easy to overcome.
Screwing It Up Safely
The first road block is a lack of confidence on the part of first time investors. Maybe you want to invest in the market but you're not sure you can. And who can blame you? After all, you've probably heard that a lot of brokers and financial advisors don't even make money at this game. So who are you, all of a sudden?
Maybe you never gave it a go. Maybe you denied yourself the benefit of getting your money to work for you, and the result is that you continue to work for your money. You can see that if you stay on the treadmill, nothing will change, but you're not sure where to get started.
You can change your results if you want to. Start by proving to yourself that you can do it. Start by keeping an eye on the sectors that interest you. Use Monopoly money at first. Establish a successful track record - even small wins - and gain some confidence. Do your research. Check out a variety of different resources, and get comfortable with the lay of the land. (Bookmark SectorMatic.com, for instance. Check out our Money Tools and Favorite Links, while you're at it.) Enter the real market with real money only when you are ready. Practice on paper first, and show yourself you can make money consistently and safely.
The Magic of 12 Minutes
The second road block to investing is procrastination. (You might be tempted, for example, to put down this article and get back to it tomorrow.)
Is that you - a slow starter? Are you forever going to do it tomorrow... and tomorrow... and tomorrow? (That's Shakespeare, by the way.) Is it on your To Do list but you never quite move off the stick? Maybe you always come up with a reason for not doing instead of doing, then you wonder why things aren't happening for you. It's okay, as long as you recognize it and work on it. Procrastination is something you can overcome. When you do, it'll set you apart from 95 percent of other folks. Honest.
Okay, here's the thing. Imagine where you can be and what you can achieve in one year if you just get started. Whatever you want to get done, do it. Only 12 minutes a day adds up to an hour a week, 52 hours a year - and that's with weekends off. No fooling! You don't have to imagine where you'll be a year from now if you don't start; you're already there. And you know what? That same year will come and go anyway, regardless of your choice.
So what do you do? Well, that's up to you. Whatever your goal, the first thing to do is get started. Take small steps at first, and pat yourself on the back for every stride. Start researching. Start practicing. Start thinking about the target you want to reach, then go for it. When you see yourself investing successfully before you risk real money in any market, it will go a long way toward bolstering your confidence. And when you create these great results for yourself, your procrastination will be replaced by an eager grin.
From Novice to Expert
What makes Tiger Woods so great? He hits the ball. A lot. I mean, a lot. As with any pursuit, becoming an expert investor requires deliberate practice and a lot of diligence.
No one in their right mind would think they could compete on the PGA Tour by reading the sports section of the paper and knocking a few golf balls around. Retiring to the 19th hole to work on your game aided by 'memorium selectus' and a noisy group of friends won't cut the mustard. Yet so many of us act as if the equivalent will work with our investing.
It won't. Unlike golf, where hooks and slices give us frequent and immediate feedback on our ineptitude, investing can at times be very forgiving. (Dang!) You could make any number of mistakes and still get great returns. The stock market can be a tricky place to measure performance. It's not like golf where lucky mishaps are relatively obvious. Bad investment decisions can produce good investment results, and vice versa. This lack of feedback can make it hard to improve your skills.
Reaching expert levels of performance takes time and application, or deliberate practice. Unfortunately deliberate practice doesn't mean the investment equivalent of kicking a football around with your friends. Instead, it means setting specific and increasingly challenging targets and goals, measuring the results, and adjusting the game plan according to this feedback. So yeah, maybe that is a little like kicking a football around. You've got to keep your eye on the ball, and you've got to actually do something, like we've said all along.
The great money magnate Warren Buffett identified this problem years ago and suggested focusing on 'owner earnings.' Buffet essentially defines this as the cash earnings of a business, less the average yearly capital expense required to hold its competitive edge. When you buy part ownership of a business, as you do when you buy shares, your first interest should be on those owner earnings.
Wherever you find yourself on the road to success - whether you've seen some miles or you're still standing on the sidewalk - have confidence that you can get where you want to go. You can make it. The key is to enjoy the ride.
Written by Jack Schmidt
Special to SectorMatic Money Site
JackSchmidt@SectorMatic.com
