5 Ways to Calm Your Fears When Investing in the Stock Market

by Kevin on June 7, 2010

These days some think it’s crazy to suggest investing in the stock market. I’m not going to suggest you put every single extra dollar you have into stocks. But I will suggest that you consider maxing out your retirement funds on an annual basis. If doing so still has you shaking in your boots, or if you’ve had your money in there a while and you’re tired of watching it go up and down, here are 5 suggestions for calming your fears.

Diversify – You can never escape overall market risk within stocks. The risk is inherently there. However, you can diversify your stock portfolio and reduce your industry risk, geographic risk, size investment risk, and individual investment risk. The more diverse your set of stock investments, the less risk you have that your investment will be worthless.

Reduce Expenses – Trading in stocks can be complex and expensive. If you plan on actively trading your stocks, consider using an online stock broker for cheap stock trading. Better yet, consider low-cost stock investments like index funds. Reducing expenses will remove the risk that your investment gains will be eaten by expensive fund management and trading fees.

Understand Your Investments – Knowledge brings awareness. And awareness brings understanding. Understanding helps to calm your fears. Get to know each of your investment choices. Understand the businesses and industries they are invested in. Understand how your different funds are managed and how fees are charged on each one.

Think Long-Term – Over the long haul stocks have outperformed all other investments. From 1926 to 2006 the stock market returned an average of 10.1% annually. It may not be sexy, but it works. Invest for the long haul and don’t worry about the day-to-day swings.

Have Faith in US Business – Lastly, I’ll share one thing that I keep telling myself to calm my own fears. Just have faith that United States businesses will have success. Do you believe in Apple, Google, Coke, and Wal-Mart? They are solid businesses built on products and services that work. They aren’t all going to implode at once. The market is made up of these businesses. And behind each of those businesses is the American entreprenuer and worker. I believe in those guys and gals. I just have faith that they’ll keep pressing on and producing the stuff we want. Why wouldn’t they?

What do you think about to help you calm any fears you might have about the stock market and your retirement?

This post was provided by PT of PT Money. Visit PT Money: Personal Finance to learn more about investing and to see the latest information about online savings accounts.

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stiven June 8, 2010 at 3:52 am

These days some think it’s crazy to suggest investing in the stock market. I’m not going to suggest you put every single extra dollar you have into stocks. But I will suggest that you consider maxing out your retirement funds on an annual basis. If doing so still has you shaking in your boots, or if you’ve had your money in there a while and you’re tired of watching it go up and down, :))

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