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The Hardest Parts About Investing (With Solutions)
10 of the hardest parts about investing in the stock market and how to solve them
Welcome to The Profit Zone đź‘‹
Where thousands of millionaires, CEO’s and high-performing entrepreneurs read the #1 financial newsletter on the web.
Happy Monday!
Let’s start the week off strong.
The agenda for today:
👉 A Word From Our Sponsor Sure Dividend: High-Quality Dividend Stocks, Long-Term Plan
👉 The 5 Hardest Parts About Investing (With Solutions)
👉 Get our FREE Dividend Stock Checklist
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The 5 Hardest Parts About Investing (With Solutions)
Problem #1: Managing Your Emotions
Fear and greed can lead to impulsive decision-making.
For example, panic-selling during a market downturn or buying into the hype when the market goes on a bull run.
Solution #1: It’s important to know WHY you bought in the first place. If you know WHY and if that thesis hasn’t changed and the fundamentals are healthy, there is no reason to get emotional and sell.
Additionally, if you know WHY you’re investing and you have a strategy in place, there’s no reason to give into the hype and invest in stocks that don’t fit your risk tolerance or end goal.
I wrote a post on behavioural investing and how to manage your emotions. You can read it below:
Problem #2: Trying to time the market
Trying to predict when to buy or sell based on short-term market volatility is extremely difficult and even more risky.
When someone says the market is at the bottom/top, I can assure you they have no idea what they’re talking about and are only making a guess.
Solution #2: Time IN the market > TIMING the market. Get as much money invested as early as you can and let compounding do the work for you. Dollar Cost Averaging (DCA) works great to eliminate the desire to time the market.
I wrote a post on the pros and cons of Dollar Cost Averaging, you can read it below:
Problem #3: Choosing the Right Stocks
There are thousands of stocks available, within many different types of sectors and tons of locations around the globe. This makes choosing the right stocks extremely difficult for the average investor who doesn’t know what to look for.
Solution #3: I have 2 solutions for you.
1) Get my free dividend checklist that will take you through a step-by-step analysis to find only high-quality dividend stocks (it’s 100% free)
Having Trouble Analyzing Dividend Stocks? Try Our FREE Dividend Stock Checklist. |
2) Sign up for a Snowball Analytics account where you can track your portfolio, see your dividend income update in real-time, use projection tools to stay on track with your goals and use the stock screener to filter by your own personalized criteria so you can eliminate the junk stocks that don’t fit in your portfolio.
Use code “dividenddomination” to get a discount on all premium plans.
Problem #4: Risk Management
Balancing risk and reward is a tricky task for the average investor.
Taking on too much risk can lead to big losses if you’re not careful, but being too conservative may lead to missing out on returns you otherwise could have had.
You must strike a balance between the two.
Solution #4: Your aim should be to match the stocks in your portfolio to your risk tolerance. Too many times I’ve seen investors who say they have a moderate risk tolerance but their portfolio’s are full of small-cap tech. There has to be some alignment there.
Learn how to value risk and reward using the Sharpe Ratio. This ratio divides a portfolio's excess returns by a measure of its volatility to assess risk-adjusted performance.
I wrote a post on how to use the Sharpe Ratio. Read it below:
Problem #5: Market Sentiment vs. Fundamental
The stock price may not always reflect the company's actual performance or intrinsic value, making it hard to figure out what you should be paying for your shares.
Market sentiment is a large driver of stock prices. When a company is hyped up, the price typically rises with it, ignoring all fundamentals.
That’s great if you’re a day trader and want to make a quick dollar, but we’re investors…
Which is why it’s always smart to go back to the basics and value the stock in comparison to market sentiment.
Solution #5: Understanding how to value a stock based on its current fundamentals and future projections is a skill every investor needs to learn. A $500 stock could be cheap and a $50 stock could be expensive. It all comes down to the intrinsic value of the company.
I wrote a post on why stock prices don’t mean sh*t. You can read it below:
See you in the next one!
Dividends are the Holy Grail of passive income
Because it's money you earn for doing ZERO work
Rental properties require upkeep
Selling books requires promotion
YouTube requires creation
Running a business requires workDividends require no work at all
Buy, hold, get paid
— THE DIVIDEND DOMINATOR (@TheAlphaThought)
10:36 PM • Sep 11, 2024
If you’re having trouble analyzing dividend stocks and want a step-by-step checklist you can use to find the best companies in the market.
We’ve got you covered.
Introducing (as well as mentioned above) Dividend Dominator’s Dividend Stock Checklist.
I’ve included some of the most important metrics to look at when analyzing dividend stocks.
Now you can have this by your side and check off the boxes one by one to be more confident you’re making the right investment decisions.
Having Trouble Analyzing Dividend Stocks? Try Our FREE Dividend Stock Checklist. |
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