How To Improve Your Investment Future In Just 10 Minutes

The SPDR S&P 500 ETF Trust SPY is now up more than 60% from its March 2020 lows. Unfortunately, not every investor’s portfolio has matched that gain. 

When you’re struggling with making winning investments, it can seem nearly impossible to get ahead in the market. But becoming a better investor isn’t as daunting of a task as it may seem. In fact, here are seven ways you can improve your investing in just 10 minutes or less.

Related Link: This 2009 Playbook Suggests Trouble Ahead For The S&P 500

Set clear goals. Rushing in and out of trades without rhyme or reason is the fastest way to lose money in the stock market. Getting rich quick is not a viable goal. Historically, the S&P 500 has generated average annual returns in the 8% to 15% range. Significantly outperforming those returns over a 10-year period or longer is extremely difficult and extremely rare.

If you’re trying to significantly beat those returns, understand that you will likely need to make some extremely risky investments to do so.

Be consistent. Like weight loss, endurance training or learning a second language, long-term investment is more of a marathon than a sprint. It can seem intimidating to start from scratch when investing for retirement. But you don’t need to be putting thousands of dollars into your portfolio at a time as long as you are being consistent. Even something as small as $20 or $50 a month can add up over time, especially if you start investing at a young age. But you must be consistent.

Let go of your emotions. It's extremely counterintuitive for inexperienced investors, but many times the way you feel about a stock will be leading you 180 degrees in the wrong direction. Experienced investors know the times at which there is the most excitement and buying enthusiasm surrounding a stock typically corresponds to a cyclical high, or exactly the time you want to be selling. Likewise, the time at which investors are most scared or frustrated with a stock often marks an excellent time to buy.

Forget your emotions. Invest based on rational analysis and carefully researched theses.

Take a more long-term approach. Only a tiny fraction of day traders actually beat the market, and that rare breed typically has decades of professional experience. In any given hour on any given day, stock market movements are mostly noise generated by high-frequency trading algorithms. The longer you expand your time horizon, the more consistent the market returns will be.

Diversify your portfolio. If you find yourself consistently missing the hottest stocks and the hottest market sectors, there’s an easy way to make sure you don’t miss the next trendy Wall Street theme — buy everything!

Not only does diversification ensure you won’t miss out on the market’s hottest stocks, but it also mitigates the risk of you picking one or two duds that will tank your overall returns. One of the best ways to easily diversify is by investing in exchange-traded funds, such as the SPY ETF or sector ETFs like the Technology Select Sector SPDR Fund XLK and the SPDR S&P Biotech ETF XBI.

Know what you’re buying and why. Knowing the brand name of a company is not good enough. Know exactly how the company makes its money. Understand if its revenue and earnings are growing or shrinking. Figure out who the company’s competitors are and if it is gaining or losing market share. And understand how expensive its stock price is relative to underlying metrics such as earnings per share, sales, free cash flow and book value.

Prepare for the next opportunity. In times like these, it may seem like stock prices only rise. But the people who are in the best position today are the ones that were already prepared to pull the trigger back in February of 2020 and knew exactly what to do when the market bottomed in March.

Make sure you have at least some cash or margin available to buy the next time the market takes an unexpected dip. Maintain a watchlist of stocks you plan to buy, and know exactly how much you’re comfortable buying. If you make all your buying decisions ahead of time, you won’t be scrambling to make decisions in real-time the next time a major buying opportunity comes around.