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Is Investing in the Stock Market Really That Easy?

Retirement Planning

Last month I wrote about how to invest in stocks hoping and planning to turn it into a little mini- series on investing in the stock market. What can I say – summer has taken hold and I sort of got away from that plan. “No more!” I say. As I’ve shared before in my stock broker confessional, working in the online brokerage industry has afforded me the pleasure of encountering every kind of investor out there. I got to see those just starting out to those who had been day trading for years. One of the overarching things I saw was how difficult many investors make investing in the stock market when it really does not have to be. Not to say that it’s simple, but if you do really take investing in the stock market seriously it can be brought down to a level that will be easier than most can imagine.

With Knowledge Comes Power

As I wrote last month, when you’re looking to invest in the stock market, so much of it comes down to knowledge. As the saying goes, with knowledge comes power and that could not be more true than in relation to investing in the stock market. The great thing is that there is a wealth of information available and most of it is free or very cheap. The key to getting that knowledge is finding what works for you and running with it. I have written several posts that cover some of the basics and there is a ton of information online that can be incredibly useful. Beyond that, I would also recommend A Random Walk Down Wall Street which is considered one of the pinnacles to begin a journey of investing in stocks. You will generally find that with increased knowledge you will become more comfortable with being in the stock market and more confident in your decision making. You will also find that while there is a lot of information on investing in the stock market available you too will find that there is a lot of “noise.” When I say noise I mean talking heads on CNBC and the like that will convince you that the stock market is doing one thing or another. Do your best to block that out and do what’s best for your portfolio and you’ll do yourself a big favor.

Know What You’re Comfortable With

Now that you’ve armed yourself with some knowledge and are feeling comfortable with the next steps you’ll want to determine what your risk profile or, better yet, your risk tolerance is. Essentially, you need to determine what will help you sleep at night. This is different for everyone and there are some investment tools to help you determine this. Do yourself a favor and take ten minutes to determine where you’re at in regards to risk tolerance. Personally speaking, I have a more aggressive view towards my investments and am willing to take on quite a bit of risk, but if you’re more conservative then my portfolio will be the last thing you want. If you’re unsure about what your risk tolerance might be then a great place to start is to determine what your investing goals are. That can help you narrow down what time frame you’re looking at and help you look at what type of asset allocation you’ll want to have. For example, if you’re five years from retirement then you may find that you do not want to be concentrated heavily in growth stocks, but looking at a more diverse mix of dividend paying stocks along with some more conservative investments. This may sound overwhelming at first, but I assure you that with a little due diligence it can be managed quite simply for most.

Investing in Stocks Requires Discipline

One of the key mistakes I saw day in and day out with many investors was that they lacked discipline and had an unwillingness to develop one. Investing in the stock market, especially the last number of years, is a very up and down journey. If you allow that to get the best of your emotions then you’re only harming yourself. One of the simplest ways to help grow that discipline is to have an investment plan. This plan does not have to be exhaustive and can be as simple as a small outline of what you’re looking for in a company, mutual fund, etc. to invest in. Keep in mind that this investment plan will, at times, be a fluid document. While you may always be at some level of retirement planning that’ll change as you get older and earn more income and you’ll have other things that may happen in life that will require changes to your plan. The key to all of this, is knowing what your goals are in relation to investing in the stock market and being disciplined about your investing. Without that discipline, you’ll open yourself up to making foolish decisions that’ll impact your investing and potentially set you back. I know this is easier said than done, but if you act with discipline you’ll make your investing work for you and find it easier to manage.

Investing in the Stock Market Does Not Have to be Difficult

While it may sound a little pie in the sky, I am a firm believer that investing in the stock market does not have to be difficult. Granted, if you’re simply picking stocks and involved in heavy stock trading then investing may be more difficult for you. I saw this every day in my former job and it pained me to see retail investors shoot themselves in the foot simply because they were making it so difficult on themselves. Ultimately, investing in the stock market can be as easy as we want to make it. I find that focusing on what you can control and not worrying about the rest is a great way to put yourself on the path of investing success. While there are many that do have complex situations that might make investing in stocks more intricate, there are also many that do not face this intricacy. If you find investing in the stock market difficult to the point that it’s holding you back from investing in stocks, find ways to boil it down for yourself and acquire solid educational tools related to the stock market. By following that  approach, you can make investing in the stock market a bit easier to manage as well as easier to follow.

Do you find that investing in the stock market is easy or difficult for you? Is there anything you’d like to see covered in this series?

 

Photo courtesy of: StockMonkeys.com

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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally

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65 Comments

  • Mark Ross says:

    I really think that investing in stocks can be easy. As long as the investor has prepared himself pretty well. Reading books, looking at the latest news about the economy, monitoring the stock prices, reading financial blogs, especially those that has stock-related topics like this one, can really make your life as an investor easier than those that don’t even do any single one of those things. Am I right with those John?
    Mark Ross recently posted…15 Ways On How You Can Save Money On GroceriesMy Profile

    • John says:

      It can be easy, though it does take some time to get to that point. The nice thing is that there is a wealth of information available to help get you educated. Once you educate yourself some, there can be some ease with it – generally speaking.

    • The bottom line is that there are so many investors out there with superior knowledge and speed that gaining an informational advantage as an individual investor is almost impossible. Your time may be better spent allocating your portfolio among index Etfs and then using the rest of your time getting out and enjoying life. I completely understand the draw to stock investing but when you are an individual investor you might as well be throwing darts compared to the massive amount of info that your direct competition has.

  • I think investing is easy, bu that is because I ignore what all of the “experts” are saying. No one really knows what will happen from one day to the next. Over the long term, the trend of the stock market is up. So I make it a point to invest in low cost funds and ETFs and just let time work it’s magic.
    Jon @ MoneySmartGuides recently posted…The Round Table – July 12, 2013My Profile

  • Matt Becker says:

    I definitely agree that it can, and really should, be very simple, though not necessarily easy. The best strategies are indeed very simple, but they can be tough to stick with when the market gets rocking and rolling. It can be difficult to really believe that sitting still is the right course of action, even though it almost always is.
    Matt Becker recently posted…When Does it Make Sense to Shop for Insurance?My Profile

    • John says:

      That’ a great distinction Matt and one that I should’ve worded that way. I agree that it can be difficult to stay the course when things get interesting. The thing is though, I believe the ones that don’t freak out are the ones that position themselves the best. However, logic is generally powerless against emotion if left unchecked.

  • The best thing to do for beginners is to invest in market index funds. I did a whole post and video about it here if anyone is interested: http://www.moneyahoy.com/investing-in-market-index-funds-is-best/
    Derek – MoneyAhoy.com recently posted…Does High Deductible Car or Home Insurance Actually Save Money?My Profile

    • John says:

      I would tend to agree Derek. It’s simple and does so much of the work for you. The problem is that it isn’t very “sexy” for many to go after.

  • I think I definitely over-complicate it sometimes. I try to track certain industries, but that turns into tracking certain stocks, which turns into comparing stocks…these are all good activities, but I think even more important is to slowly and consistently contribute money towards some sort of account that is exposed to the stock market. Whether it’s an account where you pick a bucket of individual stocks, a 401k that has funds for you to choose from, or some combination of the two, I think it’s just mainly important to get your money exposed to the market and continue to contribute over time.
    DC @ Young Adult Money recently posted…Using Dividend-Paying Stocks for IncomeMy Profile

    • John says:

      We all have a tendency to do that, myself included, and I think a big key is having balance to it. That said, there are few things that can replace simply putting money in solid index funds consistently over time.

  • The hardest part is getting started. Once you get your feet wet and you gain some experience it isn’t that scary or difficult. I tend not to invest in the market since 2008 and trade it instead. I find this generates far more consistent profits as long as i stick to my trading rules. Sure I miss out on getting multi-bagger gains a lot of the time, but I would rather make lots of small gains and actually make money, than lose money.
    Glen @ Monster Piggy Bank recently posted…Monthly Bill Payments vs Yearly Bill PaymentsMy Profile

    • John says:

      I agree that can be a big hurdle to overcome Glen. Once you do start is does become much less daunting. I don’t have the time to devote to trading, though I wish I did. :)

  • Alexa says:

    I have not invested anything yet. I am getting to the point now where I will have money in the near future to invest. A whole lot of learning about the stock market and my choices is going to be needed. I am a patient person though. I am just going to keep it simple and think long term.
    Alexa recently posted…How to Market Your Online Freelance BusinessMy Profile

    • John says:

      That’s a huge key to getting started Alexa – being patient and keeping it simple. Having that will put you ahead of many others out there.

  • My experience over the last few years has been that it is relatively easy to invest in the stock market. But if don’t have a plan, and aren’t willing to put in regular effort keeping up with your investments and researching new ones, disaster awaits.
    My Financial Independence Journey recently posted…Weekend Link LoveMy Profile

    • John says:

      I could not agree more MFIJ. Having that plan and researching new ones are key. Of course, with the upswings the last few years nearly anyone can bag a gain. It’s the ones that look for new ones and can weather the storm of the up and down cycle that will do better over the long term.

  • Other than with my retirement savings, I have not yet ventured into the stock market, but as soon as I pay off my car loan I’m going to make it a priority.
    SuburbanFinance recently posted…New Wireless Company Code of Conduct for CanadiansMy Profile

  • Debt Blag says:

    I tell people this all the time. It’s the sort of thing you have to just do once to realize that it’s not that bad.

    Also, that Scrabble play doesn’t seem possible…unless someone played “-ing” after “invest” was on the board, but that hardly seems useful. No, nothing’s right here at all…
    Debt Blag recently posted…Saving money on flights, air travel; lessons learnedMy Profile

    • John says:

      That’s a great point. It seems daunting, but it really isn’t once you do it and gain some comfort.

      Lol, on the Scrabble play. You never know what some are thinking! ;)

  • I think a challenging part of investing strategy is judging one’s own risk profile. Especially at times like these when record stock prices dominate the financial news, despite all the warnings and disclaimers, many people tend to think stocks are a no-lose proposition. We think we’re not very risk averse, but in reality we’re subconsciously thinking stocks are going up so we’re not taking on much risk. I think none of us knows really how risk averse we are until we go through a major price downturn and see how we feel and whether our knees buckle.
    Kurt @ Money Counselor recently posted…Wacky Video and Thanks, Week Ending 13 July 2013My Profile

    • John says:

      That’s a great point Kurt. Risk tolerance is a great thing to figure out, but it can be tricky once you put some meat on the bones with some turbulence. I am generally ok with it, though so many are not and thus harm their own well being as a result.

  • I find it to be easy but its because I have come to the realization that I am going to lose some and win some. Sometimes more losses than gain but over time it will balance. I also make it easy by sitting ground rules. I am investing a certain amount, in a certain stock, at a price and will sell at this price and buy more at another. I always take profits when I make them and buy back on the dip if I still believe in the stock. Stocks are emotions and even some of the best companies will have bad times in the market. Its a guessing game for the most part unless you holding for the long term to make it a little easier on the brain.
    Thomas | Your Daily Finance recently posted…When Is the Right Time to Change JobsMy Profile

    • John says:

      I think having that realization is vital to have Thomas. Having an investment plan is a great way to get started towards that and will help you immensely regardless of what kind of investor you are.

  • Actually, I din’t try to invest in stocks. Yes, I have a plan to invest in stocks someday. As far as I understand making money trough stocks is not too hard and not too easy. It needs time to study and to read latest business trends, business news and global opportunities. You should have the discipline to control your emotion regarding the daily reaction or outcomes of your investment.
    Walt@MyWealthDesire recently posted…Tips on How to be a MillionaireMy Profile

    • John says:

      Yes, watching those emotions and keeping them in check is vital. Without that, you’re likely going to get yourself burned in the long run.

  • Once this annoying little (big?) debt gets paid, I’m going to invest like a superstar so in the meantime I’m going to educate myself as best as I can :)
    Girl Meets Debt recently posted…Make the Time to Invest in your RelationshipsMy Profile

  • Greg@Thriftgenuity says:

    I agree that gaining knowledge is the first step and then don’t try to outsmart the market, because you will likely just outsmart yourself. Staying the course in investing does require discipline, especially when you hear stories of people making huge money on the market.

    As for what I would like to hear more about – I think identification of risky investments is a key element for people.
    Greg@Thriftgenuity recently posted…Use Your Sense of Competition to be FrugalMy Profile

    • John says:

      I completely agree Greg. It does require discipline and those that have it are much better off than those who do not have it.

      Thanks for the input, I’ll look at what I can come up with for that. :)

  • Sam Gill @ Digital Spikes says:

    Stock market investment must be treated as Real Estate for a long term to yield great returns. Likewise real estate we don’t need to check the stock prices everyday. Do we check property / land / home prices everyday , No right. Apply the same here too, be a long term investor in stock market as well
    Sam Gill @ Digital Spikes recently posted…What to look for in a credit card : How to choose credit cardMy Profile

    • John says:

      I agree that there is not really a “need” to check stock prices each day. I do, because I am a dork like that, but generally it’s not needed unless you’re a trader.

  • Squirrelers says:

    Investing really should be easy. I couldn’t wait to start even when I was much younger. Yes, before online trading was even common :)

    Really, it seems like a lot of people have a mental block toward it, or maybe it’s a matter of how they were raised. If their parents never talked of investing and only operated with short-term paycheck-to-paycheck thinking, it could pass down to the next generations. It takes a paradigm shift for some people to get started, but it really should be easy.
    Squirrelers recently posted…Making Money on Market Overreactions: The Twinkie ExampleMy Profile

    • John says:

      I agree that many do have a mental block with it on many levels. That’s why I think educating yourself is so key. That can help remove the mental block, though many do not have that patience.

  • anna says:

    Excellent tips – investing is still pretty daunting to be, but bit by bit I’m learning about the different methods, starting to invest very modestly, and getting more comfortable with it and all the terminology. Thanks for the book recommendation, I’ll have to check it out!
    anna recently posted…Combining FinancesMy Profile

  • I think investing is not as hard as some people make it out to be. I was terrified of investing until I took the plunge and decided to just do it. Once I got my feet wet I learned that it is not that hard to have a successful investment portfolio.

    At the same time, I think investing is one of those things that you can never learn everything about. There are so many tips and tricks that there will always be something more to learn.
    Nick @ ayoungpro.com recently posted…Millennial Speak – What is a Side Hustle?My Profile

    • John says:

      That’s a great point Nick, and I could not agree more. Anyone who claims to know everything about investing should not be listened to as they’re likely only selling a bill of goods.

  • Justin @ The Family Finances says:

    Investing in stocks really is easy: Use an Index Fund that mirrors the S&P 500. You get exposure to the market as a whole without worrying about the volatility of a single stock.
    Justin @ The Family Finances recently posted…A Parent’s Guide to Buying a HomeMy Profile

    • John says:

      It can be Justin, especially if you choose to go that route. The problem is that, for many, it is not exciting or “sexy” enough.

  • I still find myself struggling to understand all there is to know when it comes to charts, ratios, history, etc, and I’ve been doing it for years!

    My advice to anyone looking to start out: Just buy a mutual fund or ETF index fund. You don’t have to know anything to get one. But here’s what will happen: You’ll either get really comfortable with the price moving up and down and up and down. Or you’ll hate it and decide to invest in something else completely. If you ever make it past the first challenge, then you can start to pile on the more complex obstacles of picking the right stocks, etc.
    My Money Design recently posted…The Value of Time and MoneyMy Profile

    • John says:

      I struggle with charts as well MMD. I have not taken the appropriate time to figure them out to the level I am comfortable with. Ratios I am comfortable with.

      Great point on what to do if you’re just starting out and even for many others. As long as you like vanilla and generally consistent returns then it’s a great way to start.

  • I think investing in the stock market can be easy if you are investing for the long term. As many of said above…find an asset allocation that is appropriate for you and that you’re comfortable with and buy low cost index funds. Easier is sometimes also better.

    • John says:

      I agree Andrew, easier is often better – especially with investing. So many do not seem to like easy though and thus pay for it in the long run.

  • Investing in stocks can seem a lot more daunting than it really is. There’s a lot of information, which is to say that there’s sometimes too much information. I started investing in my mid 20′s. I can’t say I knew what I was doing when I started, and have made a lot of mistakes along the way – heck, I’m still trying to figure out what strategy works best. But if there’s one thing I’ve learned over the years, is it seems to have a lot less to do with how much you know (to some extent) and lot more to do with how well you can manage your emotions. It’s easy to get caught up sometimes with one days winnings or losses. And patience can be your best friend or your worst enemy. So I think it’s almost best to start small and learn the ropes.
    Anthony @ Thrifty Dad recently posted…Self-employed: budgeting on a fluctuating incomeMy Profile

    • John says:

      You’re spot on Anthony! Obtaining the knowledge is one thing, keeping those emotions at bay and knowing to not listen to them is something more.

  • I know that I was a little scared at first when I jumped into investing, but with all of the tools and platforms out there, it is relatively easy to invest. There are other ways to make it difficult, but for the most part, the technology advancements have really made investing simple.
    Grayson @ Debt Roundup recently posted…Money Multitasking – Concept and ExecutionMy Profile

    • John says:

      I agree Grayson, there are a lot of tools available to help make it easier to get started. As long as you know where to go to find them then you’re well on your way to getting started.

  • krantcents says:

    I think the stock market looks very complicated and scary to many people. You can approach it simply by just investing in broad index mutual funds and cover the market. Keeping it simple allows newbies to enter the market and learn as they go or you can just keep it simple.
    krantcents recently posted…How to Think Rich and Be RichMy Profile

  • If a person is willing to do all the necessary legwork upfront, then investing is not complicated. We all must work out a plan, think through our risk tolerance, and learn about the investments we might choose. If we do all that before we place a dime in the market, our investing life will be much more enjoyable. After that, it just requires discipline and focus to stay the course.
    Brian @ Luke1428 recently posted…Investing Made Easy (Part V): Common Investing MistakesMy Profile

  • The big trouble is in knowing who to believe. I suspect many ‘pundits’ are either just guessing or have another agenda. In the end investing in stock is quite a gamble unless you know the company really well when it can become insider trading.

    On the other hand investing in currencies is much simpler. So I suspect we will go that way.
    John@MoneyPrinciple recently posted…Principled Money Posts #49: spending or investment, this is the question?My Profile

    • John says:

      If you’re blindly investing in individual stocks then I think you have a point. However, if you’re in solid index funds then it does take a lot of the “gambling” out of it.

      Funny that you find currency investing much simpler as I have found many that would feel the opposite. But, it’s all in what you know I guess.

  • I remember when I got my first job and the 401k enrollment info. I had no idea what a 401k even was! :) Needless to say I didn’t enroll and several years later when I went to work for a financial services company (oh, the irony) I was so embarrassed that I didn’t have a 401k. So like a real smarty pants, I delayed enrolling again. :D Finally, I did and it was intimidating because I made into such a beast. But I do think if we step back and understand the basics, it’s not nearly as scary as we think it is.
    Tanya @ The Heavy Purse recently posted…At What Age Should Your Teen Get a Job?My Profile

    • John says:

      I was in a very similar situation Tanya. Oh, to go back and make different decisions. :) Like you said, though, by stepping back and looking at it rationally, you can generally find that it’s not as difficult as once thought.

  • Investing really is easy as long as you keep it simple and don’t get caught up in trying to impress other people by making complicated trades. The goal is to make money, not sound like a cnbc pundit at parties. Index investing is the best way to do this for most people IMO, but if you pick individual stocks its important to hold them and not try to make frequent short term trades.
    The First Million is the Hardest recently posted…Saving Half of My Income – A Progress ReportMy Profile

    • John says:

      I agree Jay. I think for many starting out they’re well served by going the index fund route. That can, generally speaking, take much of the work of it for them and much simpler.

  • So far, we’ve only invested in blue chip stocks with a DRIP program so the stocks can grow themselves over many years. I’d like to expand beyond that eventually – once we get out of debt – and I’ve been reading more about investing lately to be ready. I want to have a firm plan in place for all my freed up money once my debt is gone in a couple of years and investments are going to be a big part of that plan! Thanks for the book recommendation (A Random Walk Down Wall Street) – it sounds like a good place to get started!
    Lindsey @ Cents & Sensibility recently posted…Ask Darwin: the answer to all your financial questionsMy Profile

  • Buck Inspire says:

    I’m embarrassed to say I was guilty of everything you talked about. I was lazy to learn more because I thought it was so easy to pick and click a button. I never learned my risk tolerance and I flew by the seat of my pants with no plans. You can guess how things turned out. I finally have my head on straight and seeing some positive results. These points should be stressed to all high schoolers learning about money and investing. As for me, better late than never.

  • I think that investing is easy, but investing successfully is the trickier part. So many people aren’t interested in learning about things, they just go through the motions. I definitely know what my risk tolerance is, but I when I first started investing I wasn’t sure how to apply it.
    Daisy @ Young Finances recently posted…Entrepreneur Fridays: The ManHammerMy Profile

  • Nice post. I had that experience myself. I wanted to be a trader so much in the past and desired it at all, but I wasn’t successful. I still do not know what I was doing wrong. But what I was able to be successful in was dividend investing. Buying stocks for income and stick with them. And I discussed it with Dave Landry once and he responded when I told him that I was a mechanical engineer, that this was a problem. That mechanical engineer and trader didn’t match. And his second sentence was – stick with what works for you, “why you are trying to do something what doesn’t work for you and abandoning what does work for you?” He nailed it. And I am so glad for his advice!

  • No Waste says:

    Investing is easy.

    Trading is an entirely different story. If it were easy, no one would be working anymore.

    But I’m jaded from too many boneheaded moves, I’m sure many of your readers have found success.

  • Froogalist says:

    The hardest part of setting up a financial plan is determining the right asset mix (i.e. the portion of your portfolio is each of cash, bonds, and stocks). Once you have found the right mix, the selection of particular assets can be tailored to fit your investor personality and tolerance for risk, etc.

    These are two key components that do not change daily with market swings or earnings reports. While they do need to be revisited at least annually, what happens on a daily basis in the markets is really of no consequence to your long term strategy and goals (and your asset mix).

    I am a big fan of Warren Buffett. He always buys companies that he understands and loves and his favourite holding period is “forever”. He has done pretty well for himself using this strategy.

    Buying stocks that you understand and would like to hold ‘forever’, registering them in your name, and enroling is a Dividend Reinvestment Plan (DRIP) and/or a Share Purchase Plan (SPP) is one way to help you keep you on target with your long-term goals; a sort of fix-it-and-(almost)forget- it strategy.

    Keep things simple. Steer gently and remain on course – you will get to where you want to be and be much more relaxed along the way.
    Froogalist recently posted…Best Credit Cards Comparison Is Easy And FastMy Profile

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