4 Principles to Invest Wisely and Avoid Common Market Pitfalls

Principle #1: Education

Investing in the stock market is dangerous. How do you invest wisely when there are so many investing and market pitfalls that take away investors’ money?

It’s like the Brothers Grimm fairytale about the seven poor little goats. In case you forgot or never heard it, here it goes.

Once upon a time, there was a family of seven little goats who lived in the forest. One day, their mother left to go shopping and when she was gone, a wolf appeared at the door looking for dinner.

He tricked the seven little goats into letting him inside, which they of course did because he disguised himself and talked nicely to them.

When the goats let him in, he ate them all. Except for one little goat who managed to hide.

The mother came back and found the little one, but the others (including the wolf) were gone.

She was furious and determined to take down this wicked wolf. She hunted him down and used a pair of scissors to cut the wolf’s belly open, and the six children jumped out miraculously unharmed.

This story has a happy ending. But when big bad wolves trick us into giving them our money, we don’t see that money again.

In this article I’ll share 4 principles you must be aware of if you want to avoid financial wolves.

Principle #1: Education

Investing is not as simple as, “buy low and sell high.” I bought my first stocks when I was 17, and almost 19 years later, I’m still learning new things about investing. Now, you don’t need to know everything before you start.

But you do need a basic understanding of finance, investing, and public markets. Otherwise, you end up harming your own potential to build wealth. The grandfather of modern-day investing, Benjamin Graham, said:

“The investor’s chief problem — even his worst enemy — is likely to be himself.”

This is the most important lesson for an investor. The biggest pitfall in the market is that you have no clue what you’re doing.