April 18, 2022

Staking the Stock Market: Five Easy Steps

Patrick Mayles
Forbes & Seeking Alpha Contributor

The stock market is the main source of financial freedom for so many people, from retirees to retail redditors. On the flipside, it can also be a source of intense stress and cracked nest-eggs. More than investment acumen, genius or dumb luck, the difference between a horror story and a comfortable retirement tends to come down to discipline, consistency, and risk reduction.  

The stock market is available to anyone with the discipline and wherewithal to save their money, and provides stable returns in the long run. The trick is to save a little each day, spread out your investments, and not to fret when things get frothy. 

Let’s break down how to get started on your path to a fast-growing nest egg in five easy steps. 

1. Start Saving

Before you stress about which stocks to buy, or how to weight your portfolio, the single most important thing you can do is start saving, every single day, and invest those savings. As we talk about here, starting a retirement account either solo or with your employer is a powerful way to secure your financial future. 

Additionally, many platforms make it easier than ever to set aside as little as a dollar a day to invest, so the time to get started is now! 

2. Buy in Bits

The stock market has never been more accessible to the broader public than it is today. Whether you have $10 or $10,000, you can gain instantaneous ownership of a piece of any public company. New offerings like fractional shares and zero-commission stock trades have democratized stock investment, allowing you to own a healthy, diverse portfolio no matter how big or small your investment is. 

For this reason, it makes sense to frequently purchase a tiny portion of different companies every day, or of a diversified index.  

3. Diversify

The stock market grows at a healthy pace over long periods, but in the short run, the market can take some terrifying dips and euphoria-inducing leaps. This is even truer for individual companies, whose price can double in a day, or go bankrupt overnight.  

These kinds of swings are not for the faint of heart, nor for those with low risk tolerance. For most people, the best way to deal with the uncertainty and volatility of the market is to diversify. This investment buzzword is cliché for a reason: it’s the single most important principle you can learn. If you own shares in ten companies or an entire index like the S&P 500, you will enjoy long-run returns and greatly minimize the risk of losing your savings. 

For non-experts, the best way to gain from the market is to buy a little of many different companies. Investing legend Warren Buffett agrees! He often advises beginner investors to simply park their money in the S&P 500, keep adding to it throughout their lives, and forget it’s there until they approach retirement. 

4. Research, Relax

The whole idea behind accumulating wealth is to empower yourself financially and personally. Saving and investing should increase your quality of life and reduce stress. Though starting with an index is smart, researching and investing in individual companies can add value and a sense of fun to investing. However, if you’re losing sleep over what your savings are up to, you’re doing it wrong. 

Trying to time the market is often a loser’s game, even for the professionals. It’s best to just keep buying through the peaks and valleys. If the daily dips and jumps are taking away your peace of mind, try setting a rule that you’ll only check the market once a week or even less. 

5. Take the Long View

Investing in the stock market provides the opportunity to learn more about finance, invest in companies you love, and to earn a great return on your savings. Remember that you’re not taking this money out any time soon. Like many things in life, you’ll be happier and more successful in the stock market if you take the long view and don’t stress about day-to-day price movements. 

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