Investing in the stock market is a fantastic way to build wealth, grow your savings, and prepare for retirement. But to earn as much as possible, it’s important to have the right strategy.
How and where you choose to invest will largely depend on your personal preferences. Some investors prefer to buy individual stocks, for example, while others prefer index funds or exchange-traded funds (ETFs). Regardless of where you invest, though, there are a few common mistakes that could hurt your earning potential in 2022.
Mistake No. 1: Not investing during periods of volatility
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When the stock market takes a turn for the worse, it may be tempting to press pause on investing until it recovers. However, that can sometimes do more harm than good over the long term.
Although it may seem counterintuitive, market downturns are some of the best opportunities to buy more. Stock prices are lower, making it a smart way to load up on quality investments for a fraction of the cost. If you only buy when the market is thriving, you’re buying when stocks are the most expensive. Over time, that could cost you more than you may think.
While it can be daunting to invest during periods of volatility, keep in mind that the stock market has a long history of bouncing back from downturns. As long as you’re investing in the right places, there’s a very good chance your portfolio will recover eventually.
Mistake No. 2: Pulling your money out of the market
In a similar vein, pulling your money out of the stock market altogether can also be a costly mistake.
In theory, it makes sense to withdraw your investments at the first sign of a downturn, then reinvest when prices are lower. But timing the market effectively is nearly impossible, and you could potentially lose a lot of money.
The stock market is unpredictable, and even the experts can’t predict exactly when a downturn or a crash will occur. In many cases, stock prices will fall for a few days before quickly rebounding. If you sell everything and then the market immediately surges, you’ll have missed out on those potential earnings.
On the other hand, if the market does crash and you wait too long to withdraw your savings, you could end up selling your investments for less than you paid for them — thus locking in your losses. The best move, then, is to simply hold onto your investments and …….