A lot of people fear the stock market. They consider it a form of gambling, and movies capitalize on this fact by showing dramatic scenes of investors losing it all and sinking into a state of despair and decay. The other side of the coin is the ruthless investor who risks it all on a long-shot and wins big. While there are some similarities between investing and gambling, learning to play it smart can help you earn a steady investment income over the long term.

Compare and Contrast

Gambling and investing share some characteristics: you’re betting money on a particular outcome in the hopes of increasing your earnings. There’s also a sense of excitement and the rush of adrenalin that comes from ‘playing the game.’ However, that’s where the similarities end. Unlike gambling, investors rarely lose it all. A stock may go down in value, but companies rarely go completely bankrupt without some kind of advanced warning. If you research the companies you invest in carefully, learn to ride out fluctuations in stock prices and know when to sell, you can do quite well in the market.

How to Minimize Losses in the Market

There will always be risk involved in any situation where you’re playing the odds, but if you are realistic and you don’t invest money you can’t afford to lose, you’ll increase your chances of coming out ahead. Here are some important things to remember about investing.

1. Think long-term yields, not-short term gains. Risky investments often emphasize quick cash, but that rarely happens in real life. Choose stocks that have history of steady growth over a period of time for a better shot at guaranteed earnings.

2. Don’t just get “in it to win it.” This is the habit that some traders have of holding on to a non-performing stock in the hopes that it will come back. Sentiment and hardheadedness have no place in business. Unless the stock is losing value due to a fluke, learn when to let go and get out.

3. Diversify, diversify, diversify. This can’t be said enough. A smart investor chooses a nice mix of stocks and bonds, and chooses a range of investments that will provide a nice profit up front (this is not the same as jumping on a hot stock for a quick kill) as well as steady earners. Make sure to learn as much as you can about potential investments before you put your money at risk.

You can watch this video or that to learn the basics of investing, but you’ll never truly learn until you get out there and try. There are websites that allow you to practice in the money markets or stock exchange without risking any real money. This is a good way to get comfortable and learn the ropes without losing your shirt in the process.

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