The stock market can be a wild ride and very confusing. Just as an example, what should we learn from the recent GameStop case?
The chain of video game stores has been struggling for a long time. But in January 2021, the company’s share price soared 1,500%. Then it fell back to earth.
Some investors made a fortune. Others lost fortunes. And it all happened thanks to a strange mix of Reddit stock traders, hedge funds, short sellers, and thousands of individual investors – people like you.
What should we take away from it? We asked Robin Hartill, a certified financial planner and senior writer at The Penny Hoarder. This is what she says:
1. Don’t invest based on emotion or FOMO
The GameStop stock mania was fueled in part by investor FOMO – the fear of missing out. Thousands of investors didn’t want to miss the opportunity to make huge profits, and many of these people ended up losing money.
“Ask anyone who grew up wealth and was not born rich how they did it. They are unlikely to tell you a story about short positions or buying $ 2 stocks, ”Hartill says. “No matter what you think of Wall Street, they would no doubt tell you not to make investment decisions based on emotions.”
2. Start early – buy and hold
So how did these investors build wealth?
“Most likely, they will tell you that they started investing early,” says Hartill. “You will emphasize consistency and long-term investing in day trading.”
In other words, don’t try to “time” the market. Just start investing and invest for the long term. This is how you build wealth.
Long-term, investing in the stock market will give you an average annual return of 7%, adjusted for inflation, according to agencies like the US Securities & Exchange Commission.
Not sure where to start? With an app called Stash, you can get started with just $ 1. * You can invest in parts of popular companies like Amazon, Google, Apple, and more. You can invest in fractions of stocks, which means you can invest in funds that you normally couldn’t afford.
3. Learn to do your own stock picking research
Hartill recommends budgeting a certain amount of money every month, no matter what.
We like Stash because you can choose from hundreds of stocks and funds to build your own investment portfolio. But it makes it easy by dividing them into categories based on your personal goals.
Would you like to invest conservatively now? Totally understand! Do you want to dive with medium or aggressive risk? Do what you feel
Registration takes two minutes and is completely secure. Subscription plans start at $ 1 per month. ** If you use the link above, Stash will give you a $ 5 sign up bonus once you deposit $ 5 in your account.
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. He’s a long-term investor who has never owned GameStop stock.
* For securities priced above $ 1,000, fractional share purchases start at $ 0.05.
** You will also bear the standard fees and expenses reflected in the prices of the ETFs in your account, as well as fees for various ancillary services charged by Stash and the custodian.