To keep your gains high and your losses low, you need to keep things simple. While the stock market is certainly complex, know the basics and go with your gut, and when in doubt, do bond market research and check with investment firms or even seasoned investors for ideas and guidance. Choosing a simplistic approach to investments isn’t a stupid choice – it’s a smart one. If you trade too frequently or focus on unachievable goals, you may end up losing more than you gain. Having the right expectations for investing and what you’ll get out of stocks and bonds will go a long way in keeping you in the right mindset.
First and foremost, investing in stocks and bonds is by no means a quick or even easy way to get rich. If you’ve ever had a retirement plan, such as a 401k or an IRA, you should already know this: regular contributions to these plans is a smart idea, but it takes a lot of contribution and waiting on your part to see those funds grow, especially if you invest in too many low-risk investments and not enough high-risk investments. Returns on stocks and bonds are never guaranteed, unless you go the silent partner route – which means you forgo all ownership rights in favor of receiving guaranteed repayment.
Generally, you can expect to see a 10% return on your investments, and sometimes up to 12%. It’s only if you get lucky — similar to a gold miner striking it (literally) rich — that you will see more than that. And since it can take a few years for new bonds and stocks to stabilize, don’t be surprised if you only see a three to five percent return initially. Keep in mind that the stock market works well in the short-term for finding what’s popular and what isn’t. Only if you give the market a long-term chance will you eventually find out what stocks are worth playing out, and what stocks aren’t.
Last but not least, know the golden rule of stock investing: it takes money to make money. If you want to make money from stocks and bonds, you need to be prepared to invest money.