It is not easy to motivate yourself to invest and stay invested in the stock market. The following are nine ways to keep your head in the game when you feel like quitting:
1- Realise that no one else will do it for you
It would help if you realised that no one knows what is best for your money other than you and no one else can do it but you, then you will realise that your continuous postponing and fear of losing in the stock market is because you think that you are not up to the task. Sometimes you have to force yourself; it has nothing to do with motivation; it is just that your brain is playing tricks on you.
Investing can be difficult, especially if you are in an environment where everyone is spending their money carelessly. Putting your money in a company or an ETF can sound stupid, especially since you will not see that money for a few years. However, acting on fear and others instincts will not get you far. You might be tempted to hold off on the idea or invest in a hedge fund because you think you lack the expertise, but the more you invest, the better you get. Therefore, sometimes you have to force yourself to do things and not act on fear.
2- The earlier you start, the better
The wonders of compounding interest in the stock market work best in the long term. Investing early in life and leaving your money to grow for few decades can substantially grow your money and build wealth for you.
Compound interest is the eighth wonder of the world, He who understands it, earns it. He who doesn’t, pays it.
Albert Einstein
The following example shows that time is on your side when investing early in life.
| Year | First investor | Balance | Second investor | Balance |
|---|---|---|---|---|
| 1 | $10,000 | $11,000 | ||
| 2 | $10,000 | $23,100 | ||
| 3 | $10,000 | $36,410 | ||
| 4 | $10,000 | $51,051 | ||
| 5 | $10,000 | $67,156 | ||
| 6 | $10,000 | $84,872 | ||
| 7 | $10,000 | $104,359 | ||
| 8 | $10,000 | $125,795 | ||
| 9 | $10,000 | $149,374 | ||
| 10 | $164,312 | $10,000 | $11,000 | |
| 11 | $180,743 | $10,000 | $23,100 | |
| 12 | $198,817 | $10,000 | $36,410 | |
| 13 | $218,699 | $10,000 | $51,051 | |
| 14 | $240,569 | $10,000 | $67,156 | |
| 15 | $264,626 | $10,000 | $84,872 | |
| 16 | $291,088 | $10,000 | $104,359 | |
| 17 | $320,197 | $10,000 | $125,795 | |
| 18 | $352,217 | $10,000 | $149,374 | |
| 19 | $387,438 | $10,000 | $175,312 | |
| 20 | $426,182 | $10,000 | $203,843 | |
| 21 | $468,800 | $10,000 | $235,227 | |
| 22 | $515,680 | $10,000 | $269,750 | |
| 23 | $567,248 | $10,000 | $307,725 | |
| 24 | $623,973 | $10,000 | $349,497 | |
| 25 | $686,371 | $10,000 | $395,447 | |
| 26 | $755,008 | $10,000 | $445,992 | |
| 27 | $830,508 | $10,000 | $501,591 | |
| 28 | $913,559 | $10,000 | $562,750 | |
| 29 | $1,004,915 | $10,000 | $630,025 | |
| 30 | $1,105,407 | $10,000 | $704,027 | |
| Total invested | $90,000 | $210,000 |
3- Realise what can the smart money do for you
Smart money refers to capital invested in a certain market or asset at the right time and price that can produce the highest return on your investment. You make your profit when you buy, not when you sell, so naturally, you have to look for a great deal at the right time and price. The advantage of smart money is that it only looks for the guaranteed investments with the highest return.
Searching for a bargain deal is not easy, and timing the market is complicated, and sometimes it is unpredictable and requires patience. It takes years for super investors such as Warren Buffett and Charlie Munger until they invest in a company that proves itself to have a strong moat, and when they buy, they hold to the company for as long as it keeps increasing its earnings.
With enough knowledge and skills, you can find great deals too. Why settle for a mediocre 8% return when you get 15% ROI with diligent analysis. Smart money is not so smart if you invest carelessly.
4- Be greedy when everyone is fearful
Be fearful when others are greedy, and greedy when others are fearful
Warren Buffett
One of the most famous quotes of Warren Buffett, which shows the disadvantages of going with the crowd and riding the wave that will end up in a crash.
The stock market is full of speculations, and the rules of physics do not apply to the stock market. When analysts think that a stock will keep going up forever, that stock becomes popular, and everyone starts buying it in bulk, you should be fearful because there is a lot of careless buying. This should motivate you because you can wait out the speculative period when everyone is buying stocks and driving the price up until the price drops and become underpriced. When the stock is available for half its value, you can buy heavily when everyone is selling and being fearful.
5- Understand financial literacy
Success at investing is having the knowledge and attitude required to save, analyse stocks and invest in companies as long as possible. Many people skip the learning part and jump straight to investing, which can negatively impact their success. You can remove what you do not understand by educating yourself. Therefore, learning has a significant impact on your motivation to invest and stay invested. Learn more about financial literacy here.
6- Have a goal
Having a financial goal will motivate you to invest and make plans that suit your availability and ability. Having a strategy will make you more mindful of what you invest in and how you should invest.
If you are a full-time worker, you might realise that you have less time to think about stocks, which is when you decide to go the passive investing route through ETFs. On the other hand, you might have enough time to analyse individual stocks for a higher return on investment. Having a financial goal will motivate and give you the means to work hard, save and invest. In addition, having a goal will make you more understanding of your situation and what you need to do to get there.
7- Own up to your mistakes
You might encounter setbacks that can negatively impact your portfolio and demotivate you to stay true to your goal. But you need to know that you only need to do well in few stocks to offset the losses you had. You should not be discouraged by your failures; even the most successful investors make mistakes. Mistakes will give you the chance to learn and formulate a better understanding of your circle of competence and update your strategy to suit your abilities.
Learn from the world most successful investor Warren Buffett. He might have lost billions of dollars throughout his life, but he has made many capital gains that made the losses almost non-existing.
8- Buy what you know
You do not have to go after the most complicated companies you do not understand and have no business in. Stop buying the consumer product and start buying the stock (be forward-thinking).
Peter Lynch, the author of One up on wall street and the former manager of the Magellan Fund, in just 13 years, managed to beat the market and earn an annualised return of 29.2% by buying the common stocks that were not high techy and had nothing fancy about them. He believes that investing is buying companies you frequently deal with because you already have a basic understanding of the business. But, you still have to do your analyses before you buy.
9- See what the pros are buying
If you are struggling to find good companies, you can get inspiration from super investors. There are websites such as dataroma.com, which are dedicated to tracking the portfolios of super investors, which can help you find great companies to research.
It is essential to know that such websites are few months old to when those purchases were originally made by those investors, which is why you should not copy blindly; in addition, even the pros can be wrong sometimes, instead use it as a source to finding good companies you understand and can buy at the right time.
