When you’re a beginning trader learning to navigate the stock market for the first time, it might seem like only the rich get richer. The ups and downs are difficult to predict, and you can feel stuck if your earnings are stagnant or only rising very slowly.

But investing in stocks is one of the best ways to build wealth for the long-term. The ups and downs can pay off—as long as you have a strategy, keep the right mindset, and prepare for the occasional bump in the road along your journey.

Ready to get serious about investing? Here are my top tips for succeeding in your goal to increase wealth and savings for a better financial future.

Dabble in the market before diving in

The idea of growing your savings is exciting, and many people want to go “all in” once they start to understand the basics. You might feel secure investing your savings in “safe” stocks or a steadily growing ETF (Exchange Traded Fund)—but if you’re thinking of putting your savings into the market, it’s probably time to put on the brakes.

You have to get a feel for how your money can fluctuate and change within the market for quite a while before you try your hand at it. Use discretionary funds—something you can stand to lose—for at least a few months before taking any larger risks. You’ll learn that many stocks bounce back quickly after a bearish market. You’ll also learn to recognize when it’s time to cut your losses.

Besides, even advanced traders should never use up their whole savings on investments. You should always have at least 3 – 6 months’ worth of savings available for emergencies and not tied up in stocks.

Get ready for the unexpected

Many beginning traders are surprised to find out just how much even the safest stocks can plummet from time to time. While the highs are exciting, the lows can be nerve wracking. And some people find themselves wanting to quickly bail out when they start to see red.

The stock market is in constant fluctuation. If you’re seeing your portfolio dip down lower than you’re comfortable with, it could be time to trade. But don’t act too quickly. If the market has taken a dive, it will bounce back eventually. And you may regret having pulled out your money before giving the bulls a chance to show their horns.

When you see that a stock you’re invested in is suddenly dropping, do your research before making any assumptions. As long as you have a diversified portfolio, the market will return to normalcy and continue to grow. If you’re looking to build wealth, you have to occasionally be willing to wait weeks or months for the market to return to normal.

Diversify, diversify, diversify

When you start to get into the stock market, you’ll get advice from a lot of people who have bet their money on “safe” stocks. These stocks have survived economic downturns and always come back on top, so people assume they will always remain safe.

Yes, when you’re looking to build wealth and increase your savings, you should look at stable, secure stocks. Big names in e-commerce (like Amazon) and technology (like Tesla and Apple) took a dive at the start of the pandemic but have otherwise grown steadily for years.

But that doesn’t mean you should put all your eggs in one basket. A diverse portfolio is vital to your long-term growth in the market. That means you should distribute your risk across multiple sectors (beyond just technology and e-commerce). Consider going beyond traditional investments and look at things like real estate and private equity.

You should also invest in companies of different sizes. Look at emerging companies that may soon see profit booms so you can look forward to the possibility of big returns. Balance those out with stocks from long-established companies with a history of positive growth. With a well-diversified portfolio, a single stock will never set you back.

Don’t become too attached

You might be loyal to a specific company because you share the same values as its founder. Perhaps you feel attached to a company because it’s where you had your first job or because it donates money to a cause you care about. Or maybe you’ve seen a company grow and grow and feel certain this uptick will continue—even when it shows signs of a downturn.

Using your feelings about a company or its market behavior to make decisions about buying stocks is called “emotional investing.” But it’s important not to let your feelings get in the way of your growth.

Simply put, the stock market doesn’t have space for emotion. When you get too attached, you may avoid selling even though it’s time to part ways or reduce your number of stocks. Or, you might have had previous success with a stock, making it tough to admit when that company is showing few signs of bouncing back any time soon.

So how can you avoid emotional investing? It starts with a plan.

Plan your strategy and don’t diverge

The most important thing any beginning trader can do is make a plan. Start by dabbling in the market, and then take what you’ve learned to develop a plan. Most importantly, stick to the plan as closely as you can.

That doesn’t mean you shouldn’t buy and sell as the market changes. It means you should set clear goals and make sure your strategy always aligns with those goals. If your goal is to build long-term wealth and grow your savings, you may want to stick with a diverse portfolio with low or medium risk.

That means you may not see your money multiply in just a few short years. But stick to the plan. You’re in it for the long term. Paying close attention to the market while keeping your goals in mind is key to building wealth over time.

Happy Investing,

Jeff