Wow… it’s easy to lose money in the stock market when it goes down! Because? Stocks fall 3-4 times faster than they rise. Therefore, you are likely to lose much faster, and as such, become timid that you will come back when you should have sold. And because we persuade ourselves to think “we’re in this for the long haul,” we freeze up and let it happen. But here’s the rub, you don’t have to be invested in the stock market 100% of the time to be “in it for the long haul.” We just have to know when to enter the market and when to sell.

Our biggest problem when it comes to investing

The problem for many begins when we place too much credence that the returns are always there for us, just as we assume that we can be successful as long-term investors if we just throw money into a mutual fund and hold it forever. Unfortunately, this attitude gets us into bad situations and can be easily avoided with a little knowledge.

To do this, we need to take a more active role with our investments because, in the end, we’re the only ones who really care enough about whether or not we retire rich. You work too hard for your money to afford anything less.

Here are some steps you can take next time:

1 – Get informed. Just because you didn’t go to Harvard or don’t have a finance degree doesn’t mean you can’t learn to invest. You can also seek advice from your discount broker, who has classes and webinars to follow your schedule, or subscribe to a monthly personal finance magazine, like Money, Kiplinger’s, or Smart Money, or pick up a copy of my guide and read this blog as I try to help others learn how to invest and reveal investment strategies that can help you achieve your retirement goals. No matter where you get your information from, the ultimate goal is to develop an investment plan; one that is more than just throwing money into the latest and greatest fund and hoping it grows.

2 – Learn when to go out. In previous posts, I talked about watching a simple volatility indicator, like the VIX, to know when to exit the market and when to re-enter. It is very important to learn about volatility to avoid bear markets. You see… as stocks move faster, their volatility increases. And since stocks typically fall 3-4 times faster than they rise, market volatility, as measured through the VIX indicator, increases when the stock market falls. When the VIX exceeds a certain number, I sell. It’s that easy. And when it drops below a certain point, I go back in. It’s not perfect, but I avoid a lot of market corrections and emotional headaches.

3 – Exchange Traded Funds (ETFs) should be a primary part of your portfolio allocation. You can’t afford junk fees and management fees for stock mutual funds that deplete your portfolio over time, since 80% of them fail to beat the S+P 500 index. This could make a difference of a few hundred thousand of dollars in its investment life. Unless your mutual fund is outperforming the market after fees year after year, look for an ETF with a similar investment objective as your mutual fund and consider making some changes.

4 – Always use a stop program. Another benefit of using ETFs is that you can use a stop program that automatically takes you out at a fixed price or percentage. So if you’re only willing to risk 5%, 7%, 10% or more of your money, all you have to do is start a stop program (ask your broker how). That way, you can set it and forget it. Don’t let your emotions control how much you have to lose. Remember, you can always come back later.

5 – Do not forget diversification. Our national debt is almost $10 trillion. What that means to you is that as the government adds more debt, the dollar weakens. As the dollar weakens, your money is worth less. You can counteract this by investing in offshore ETFs. But be careful. Look for markets that intend to grow more than in the past and always use a stop schedule. Otherwise, markets may punish economies that aim to grow less in the future, either from 2% to 0% as in the case of the US, or from 10% to 7% as in the case of some countries. fastest growing economies.

If you are scared or frustrated by large investment losses, it is a sign that you need to have an investment approach to managing your money. It is not difficult to take the path to build and maintain wealth. But it takes education, effort and action on your part. These 5 golden rules and some of my blog posts should get you started in the right direction.