While studies have shown that some of the most successful investors actually leave their money alone, that doesn’t mean success is guaranteed.
According to certified financial planner Douglas Goldstein, who co-authored “Rich As A King: How the Wisdom of Chess Can Make You A Grandmaster of Investing,” with chess grandmaster Susan Polgar, there are three things you need to be a successful investor.
Goldstein says that when it comes to making sound investing decisions, “without at least a sampling of each one of these, you’ve got almost no chance.”
Garnering some basic background knowledge about investing should be your first step. This can mean reading books, listening to podcasts, or browsing websites. If you’re not sure where to start, take a look at this list of investing resources that are helpful for any level.
Goldstein emphasises that you don’t need to become an expert on all aspects of investing. “Developing an understanding of basic money management does not require a PhD,” he writes, “and you don’t need to dedicate years of your life to studying every aspect of corporate finance before you buy a stock.”
You’ve probably heard the saying “practice makes perfect,” and it’s no different when it comes to mastering your investments.
I know what you’re thinking: How am I supposed to practice investing without losing actual money? According to Goldstein, all you have to do is go online. “If you want to learn about stock trading, go to one of the many free online stock trading games. You get a mock account with faux-money and can buy and sell all day. This ‘paper trading’ will give you a sense of how the motions feel without your having to risk any real money.” Investopedia, Wall Street Survivor, and Smartstocks all offer free stock market simulators.
Goldstein says “there’s no substitute for attending the ‘School of Experience.'” In other words, at some point you’re going to have to make the switch from practice investing to real investing, and gain some real experience.
Investing can seem scary, though, so if you’re not ready to make that switch just yet, Goldstein says the experience you rely on doesn’t have to be yours. He recommends making the most of available advice from experts. “If you truly want to garner investment experience, try leveraging the know-how of others. Seek mentors or licensed financial advisers who will take the time to teach you.”
Not everyone has the means to hire a financial adviser, though. If this is the case for you, consider looking into one of the many investing resources out there created by experienced investors such as Warren Buffett and John C. Bogle.
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