Since the onset of the pandemic last March, 2020, trillions of dollars in stimulus aid from Congress and The Federal Reserve were pumped into the economy. For many Americans their stimulus checks were the ticket into the complex world of investing — for the first time.
The appeal of stock trading via smartphone exploded, particularly among younger investors using investing apps that mimic the “gaming” experience. These sexy, almost addictive apps, coupled with free trading accounts and investors’ ability to buy slices of expensive stocks that they could not otherwise afford, fueled a new generation of investors. For the fortunate ones, their initial investment soared. However, a large percentage of these new investors had little to no investing experience going in, which resulted in risky investments and significant loss of capital.
As I like to say, luck is not an investment strategy. Veteran investors are successful because they understand the fundamentals of stock trading and stick to the basics. They also keenly understand that past performance is no guarantee of future results.
Following are several questions to ask yourself if you are a novice investor. Even if you are a more seasoned investor, a refresher course on investing basics is always a smart idea!
- What Are Your Top Three Investment Goal or Goals?
–Saving for Retirement, College Education, New Home
–Increase Current Cash Flow
- What is Your Time Horizon?
–Are you in your early years of investing 20s or 30s?
–Are you within five to 10 years of retirement?
- Capital Growth OR Capital Growth + Income
Do you invest for capital appreciation or gains only?
Do you invest for capital appreciation or gains and income in the form of dividends and capital gains?
- What is Your Risk Tolerance?
Conservative or Aggressive or Somewhere in Between?
Your honest answers to these questions will help to shape your investment style and approach, and will help you decide on the types of investments will comprise your investment portfolio: stocks, mutual funds, bonds, treasuries, CD’s, high-yield savings, cryptocurrencies, options, etc.