Motley Fool Investor Betting Odds: Who Is the Smartest Investor?

If you follow the market closely, you’ll know that the odds of making money investing in stocks are always in your favor.

After all, in the long run, the market consistently produces positive returns. Still, winning the short-term stock market craze isn’t a given. There’s a lot of risk involved, and many people lose their shirts in the process. If you’re looking to get involved, here are some tips on how to do it right. Consider this your ultimate stock market guide to becoming a successful investor.

Find A Financial Adviser Who Is Experienced

One of the biggest keys to investment success is finding a competent financial adviser who can help you navigate the turbulent waters of the stock market.

Unfortunately, there are a lot of incompetent quacks out there who will tell you that they can help you make millions in the stock market, and for the most part, they’re full of crap. Don’t believe everything you hear, and make sure to vet any advice that you’re given with a critical eye.

Understand The Nature Of Investment Risk

The main thing to keep in mind when considering investment risks is that money can always be lost. You might make a ton of money in the short-term, but you could also lose everything you’ve invested. One key indicator of risk is the investment adviser’s fee, which is typically a percentage of your investment.

Use Volatile Stocks

It’s crucial to take the opportunity of owning volatile stocks, because ultimately, prices will reflect all the relevant factors, and you’ll make money regardless.

Say you’ve got a great news story about a recent groundbreaking event that will boost the company’s stock price. If you buy the stock at a low price, you’ll make money when the stock rises, as you’ll be able to sell it for a higher price.

In the same way, if you’re buying a popular and fast-rising stock and the news is that the company is about to report disappointing results, you could lose money as the stock price falls. Owning volatile stocks is always a gamble, but if you’re experienced and know what you’re doing, it’s a low-risk high-reward gambit.

Diversify Your Stock Portfolio

One of the best things that you can do for your investment portfolio is to diversify it. When you own multiple stocks, especially in different industries, you reduce the risk of losing money in a single stock market crash.

Say you’ve got a large chunk of money to invest in the stock market, and you decide to put it all in a single stock. If that stock tumbles, you could lose your entire investment. By spreading it out among several other stocks, you eliminate the risk of total loss.

Consider What You’ll Be Needing

One of the most important things to consider before getting involved in the stock markets is what you’ll be needing. For instance, if you’re making large investments, you might want to consider setting up a high-quality investing account. This way, you can track your investments easily and make changes as needed.

You might also want to set up automated investment plans so that you can get on with your life. For instance, you could set up a monthly investment into your favorite stock index fund. Then, whenever you log into your account, the investments will be taken care of automatically.

If you decide to use a financial adviser, they’ll be able to help you navigate the choppy waters of the stock market and put together an investing plan that’s right for your needs. Take some time to think about what you want out of your investment experience, and then work with your adviser to create a game plan that suits your goals and budget.