St. Patrick’s Day is a time to consider all things Irish, from soda bread, to four-leafed clovers, and the all-elusive McDonald’s Shamrock Shake. It can also be a time to think about your financial future.
You may think that putting money in the stock market is all a game of chance, like spinning a roulette wheel and hoping you’ll land on a lucky number. But successful investing isn’t about finding a pot of gold at the end of a rainbow.
It’s all about setting a course and sticking to it.
Smart investors don’t believe in chance
Successful investors tend to do three simple things. They invest for the long term, invest regularly, and diversify.
Here’s a quick breakdown:
- Investing for the long term: Keeping your money invested for the long term allows you to take advantage of something called compounding. In simplest terms, compounding is any return earned on your principal, plus your past returns. For example, if you have money in a bank account, it’s the interest on that sum plus the past interest it has earned over time. If you have money in an investment account, it’s the percentage you may earn on top of your original investment, plus its previous earnings.
- Investing regularly: By investing regularly over time and adding more money when you can, you can help avoid the perils of trying to time the market.
Timing the market is when you make guesses about which way the market will head, and buying or selling stocks based on those guesses, and it’s almost never a good idea. By investing according to a set schedule, you can take your eye off the day-to-day noise of the market.
- Diversification: When you diversify, it means you’re not putting all of your eggs in one basket, so you can better weather the stock market’s ups and downs. That means you won’t put all of your money in too few stocks, bonds, or funds.
When you’ve diversified your portfolio, it will hold a variety of investments that are not all subject to the same market risks, including stocks, bonds, and cash, as well as mutual funds and exchange-traded funds (ETFs).
By diversifying, you’ll be choosing investments in numerous economic sectors—not just the hot industry of the moment—as well as in different geographies around the globe.
These are the principles of the Stash Way, our investing mantra, which you can find out about here.
Make your own luck
Stash lets you start investing for just $5.