The truth is most investors don’t get rich by day trading. Constantly buying and selling stocks on a daily (and hourly!) basis might sound exciting, but for most of us, day trading doesn’t make us rich.
If you invest in only two or three stocks, then your entire investment nest egg is tied up in only two or three stocks. In order to make money, you need at least one or two of those stocks to go up. Otherwise, you risk losing a great deal of money.
4. Dollar-cost averaging is better than timing the market.
First, timing the market (riskier). With this strategy, we only invest when we think stocks are at their lowest. Then, we hope that stocks go up from there.The second school of thought is dollar-cost averaging. This strategy means we’re investing a set amount of money at a consistent interval (ie: monthly, biweekly, etc) regardless of the price of the stock.
Though I’m a huge proponent of investing, I also encourage investors to establish realistic limits on how much money they invest. Resist the temptation to overextend yourself by investing too much money because if the market does drop, or a recession hits the economy, you might feel the burden of having too much money invested in a down market.