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How to become a better investor

June 1, 2021 • 3 min read

What we'll cover

  • How to become a better investor

  • Ways to get organized with your investments

  • How to diversify your investments

These days, it’s easier than ever before to be an investor. As brokerages simplify digital investing and eliminate commission fees that were once barriers for some, more and more people are able to take their financial futures into their own hands. Still, you may be thinking, “I don’t want to just invest — I want to be a better, smarter investor.”

You don’t have to get a degree in finance or study the stock market day in and day out to sharpen your investment skills. In fact, getting into the right mindset and sticking to a few solid strategies can boost your investment game more than you might expect.

Find your purpose and make a plan.

Whether you prefer to be an active trader or want to put your investments in good hands, creating a plan based on your goals, timeline and risk level is a smart step to take toward building a strong foundation for your portfolio.

You might invest for retirement, participate in the market to test your skills or aim to build wealth you can someday pass to future generations. No matter what it is, understanding your “why” will help you form a plan — which doesn’t have to be super complicated or elaborate. Start by mapping out how much you are going to invest and how often (for example, 10% of each paycheck) and in what kind of securities (allocating 70% of your portfolio to stocks and 30% to bonds, for instance). With a clear purpose in mind and a basic strategy to follow, you can become a more focused, consistent and confident investor.

Whether you prefer to be an active trader or want to put your investments in good hands, creating a plan based on your goals, timeline and risk level is a smart step to take toward building a strong foundation for your portfolio.

Understand stock market FOMO.

From Reddit threads to viral tweets to the evening news, it can be tough to ignore all the talk of hot stocks gaining short-term and wildly fluctuating popularity. Especially when you hear of others making it big on these kinds of investments, it’s natural to want in. Investment FOMO is a real feeling, but oftentimes it leads to snap decisions that are more detrimental to your portfolio than if you block out all the buzz.

While stock market chatter on social media isn’t all bad, it can distract you from your overall goals. This is when having a clear purpose for your investments can be extra beneficial — and make investing in Reddit-worthy stocks less tempting. Of course, if one of your investing objectives is to experiment in the market, consider strategically allocating a small portion of your portfolio to “fun” investments, such as meme stocks or other internet market phenomena, like non-fungible tokens (NFTs) or cryptocurrency.

Diversify beyond digital assets.

Portfolio diversification is one of the most essential strategies to manage your market risk. The premise is fairly simple: By spreading out your investments across a variety of different asset classes (stock, bonds, commodities, etc.), locations (domestic and foreign securities) and industries (technology, healthcare, entertainment, etc.), you’re less dependent on the success of any one security.

When you only invest in the latest market crazes, you’re essentially putting all your eggs in one basket. Especially with trending assets like NFTs or crypto, the unpredictability and price swings can result in uncomfortable portfolio volatility. Diversifying by investing in other more traditional securities and various sectors makes you less susceptible to the negative effects of one asset’s ups and downs.

Learn from trusted sources.

As an investor, you can learn about the market and investment strategies, like dollar-cost averaging all the way to options chains, in a number of ways. You might seek advice from friends, head to social media or listen to a weekly podcast. The internet is home to a wealth of resources for aspiring, experimenting and curious investors — and at Ally Invest, one of our missions is providing content that can make you more confident in the market.

From our blog (home to weekly insights and informative takes from our team of investment strategists), to our YouTube channel (where you can stream our Stock Play of the Day series), you have access to Ally Invest’s market masterminds. Whether you want to learn more about how to diversify your portfolio, what’s going on with cryptocurrency or get the scoop on major companies’ latest earnings, trusted sources can help guide you toward becoming a more well-informed investor.

Be the investor you want to be.

Becoming a better investor doesn’t have to be a full-time job. It starts by finding resources and guidance you can depend on and implementing a few tried-and-true investing strategies into your portfolio management.

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