It’s been a little over two years since I purchased my first stock (outside of a company-sponsored 401k plan). I was 29 at the time and I knew very little a about the stock market. I had just sold my company and I needed somewhere to invest my money but I wasn’t sure where. Stocks, mutual funds, real estate, bonds, start-ups, princes from unfamiliar African countries – there were so many options!
I ended up going with the stock market for a large part of my investment. Along the way I have realized that there are a few things that make it challenging for entrepreneurs to be invested in the stock market:
Entrepreneurs want to do everything on their own
Many ‘treps are driven by a passion to get things done. Sometimes we think we know it all and we want to be hands-on with everything. The problem when it comes to investing is that many entrepreneurs think that because they were successful in their business that they will make good investors and so they want to pick their own stocks, even when they lack the knowledge to do so correctly.
Entrepreneurs are impulsive
Many entrepreneurs can be impulsive. In fact, that can often lead to success when seeing an opportunity and seizing it. But when it comes to the stock market, it can lead you to buy or sell stock on impulse without looking at the big picture. Small global market shift? Sell. News headline about a new iPhone? Buy! But good investors know there is a lot more to investing than headlines.
Bias towards their own business or industry
My previous company was in the tech space. I have been working for digital companies my whole professional career and so, naturally when I decided I want to buy my own stock (See #1) and I read a headline about Facebook being undervalued (See #2) I was all-in because I felt comfortable in the tech space and felt a connection to Facebook.
Naturally, I bought it at $30 and sold it at $20. I had a similar mishap with Groupon the same week. Those were the first (and last) stocks I tried to pick on my own.
Don’t be afraid to find a pro
There’s nothing wrong with finding a professional stockbroker to help you invest in the market. All they do all day is research stocks for clients. They are trained to help you diversify ad build the right portfolio. Just be sure to talk to different financial advisors before you pick one.
If you really want to try some investing on your own, make sure know how to buy your own stocks without losing all of your money.