Step 3: Channel your inner scientist.
I loved science in school. At the time I was preparing to be a veterinarian so I took as many science courses as I could during my four years of high school- 6 classes for which I received credit (one was a college course through Syracuse University) and 1 that I would sit in on as I ate lunch.
One of the things I really loved was that you would come up with a hypothesis, then test it. You were not emotionally involved in the results. You did not try to manipulate to be what you wanted them to be. You just observed, learned, adjusted, and tested your new hypothesis.
When you approach investing in the stock market this way it completely changes the game. Instead of worrying how your stock is doing from day to day or minute to minute, think of it as an experiment.
1. Research
Take a look at what is available. Check out the company’s website. What are they known for? Do you agree with their values, vision, and mission? For example, as much as Warren Buffet likes Coca Cola, if you only consume whole, natural foods, it may not align with your values. Invest in what you know and what you love.
2. Choose
Choose not only what company you want to invest in, but also how much you want to invest. It may be a percentage of your income or a set dollar amount. Generally, small amounts consistently invested over time will outperform random large purchases.
3. Wait
This can sometimes be the hardest part. If you do not want to find yourself obsessively checking your stock’s value, choose a date when you will see how it is doing. Stocks will go up and down. You want to take a look at the long-range graph to see what the trend is.
A sharp decline is not necessarily a bad thing. Most stocks went down 30-50% after the country went into lockdown. And most of them will eventually rebound. This is where having the mindset that you will not invest more than you can afford to lose and setting aside a predetermined amount on a regular schedule will give you peace of mind.
4. Evaluate and Assess
As you check your stock the biggest question you will want to ask is if the company is still viable. There are a lot of formulas to help determine this, but the Motley Fool snap test is the simplest.
If your companies are viable, hold. If not, it is best to decide ahead of time at which point you will sell. And, keep in mind Warren Buffet’s advice: sell when everyone else is buying and buy when everyone else is selling.
He also advises you play the long game. This works well with the tax code in the USA. Investments held over 12 months receive preferential tax treatment.
5. Enjoy the journey
Over time you will learn which companies are best for you, how often you want to check on them, what your risk tolerance is, and a myriad of other things. You will make mistakes. You will have great picks and utter failures. You will probably surprise yourself. Enjoy being a student again, sitting in science class and discovering if your hypothesis is correct.