Losing £1000 in the Markets in a Month | How To Invest Profitably and Care-Free

by Adam on August 31, 2012

I checked my online investment accounts the other month and I got a bit of a shock. My investments were ‘worth’ £1000 less than they were worth just 30 days previous.

But after the intial shock of seeing a smaller figure,  I closed my browser window and got on with my day.

Nothing to See Here People

When you think about the stock market, what do you think?

  • Computer screens flashing with green and red numbers?
  • A complicated system of trades and options, dividends and capital gains?
  • Just pure indistinguishable jumble?
For many, investing is perceived as gambling, kind of like playing Fidelity.  Sure, both can be a bit of a thrill, but investing is very different.

Investing can seem crazy at times, but when it comes down to it, it can also be pretty simple…

Investing involves buying pieces of companies with the hope that those pieces grow in value over time

The value of a company is always fluctuating depending on the hopes and fears of  investors looking to buy or sell the shares of a company.

You only lose or gain money when you sell

This is a really important fact to keep in mind, particularly if you are young and don’t need to sell your investments. When investing for the long term you are not looking to make a quick buck -you are looking to buy small pieces of companies, that over time will grow in value. If you see your investments lose value, assuming you have invested in a broad ‘index’ of companies (more on how to do this below) and don’t need to cash in your investments, then it should not bother you at all -because over time the average market return is positive.

The Gradual Accumulation of Value

Over time, the stock market gains value.  Certainly different time-frames produce different periods of return, and there are no guarantees in anything, but markets do tend to go up over long periods of time. Every day people wake up, head to work, and create ‘value’. If not enough value is being produced companies go out of business, certainly, but the average performance of most businesses that you can buy a proportion of is positive. Investing in these businesses through the stock market means you get to enjoy a share of the value created by the business.


How To Invest Profitably and Care-Free

One of the easiest ways to grow your savings over the long term is by buying ‘index’ funds – buying such an investment allows you to buy a tiny piece of every company in a particular ‘index’ – for example, buying a FTSE 100 index fund allows you to own a small piece of the top biggest companies in the UK.

  1. Always invest with money you don’t need and won’t need in the event of an emergency. You don’t ever want to be forced to sell your investments due to circumstance as you can’t guarantee the value of your investments at the time you will need them. To make money in the stock market you need to control when you sell, not be controlled by circumstance.
  2. Put your investments in a Stocks and Shares ISA (or a Roth IRA if you’re in America). This protects your investment gains from tax. I use Fidelity because I think their ‘fund supermarket’ is really clear and it’s easy to set up (and I’m not getting paid to say it I just love them!)
  3. There are lots of unit trusts to fill your investment accounts with, but ‘index funds’ or ‘tracker funds’ are arguably the best, because of their low fees that match the market (rather than mutual funds with larger fees that historically lag the market on average). In terms of fees 1.5% is typical for funds, but most trackers should be less than 0.75%, although it depends if you want to invest in domestic indexes or internationally…hint: both is best!
  4. Invest consistently – don’t let emotions or market – panic influence when you invest. The easiest way is with a regular monthly contribution when you get paid…automatic contribution is automatic wealth! Most companies allow you to invest with small amounts – Fidelity for example allows you to invest with just £20 a month.
  5. Enjoy the ride. Some months your investments will be up, some months they will be down, but over time they will grow and grow and secure your financial future.


Get started today and harness the power of compounding returns and feel happy inside! Let me know how you’re getting on in the comments.


Want to know more about how YOU can start investing? I’m working on a special course to show you how, via video tutorial.



{ 3 comments… read them below or add one }

John@ stocks paying high dividends

I like how you say not to be controlled by circumstances…that is how we get into bubbles and trouble. The herd mentality…well if everyone is buying so should I, and visa versa.

Big Dave

It seems you have a self-limiting view of how to make money in the stock market. Like most people, you are only interested in the stock price. And, you believe you only make money when the stock is sold. Nothing could be further from the truth.

I do not care what the price of my stocks are. They can go up, they can go down. I DO NOT care. I invest only in stocks producing very high dividends. I invest in firms that have paid these dividends for many, many decades, in good times and bad. Chances of them not paying a dividend this year are almost non-existent. Once I have owned a stock for 4 or 5 years, I have been paid back the purchase price completely by dividends. After that, the money that comes each quarter or year is total profit. Even if the company goes bankrupt, I have lost nothing.

If you want true peace of mind and good returns, seek out companies that have been paying high dividends for forty years or more. I sleep very well on my mattress stuffed with dividend cash. And yes, I know all about compounding by reinvesting dividends, which I also do on some shares.

Julie at Nutmeg

Interesting points, Adam. I like that you pointed out the importance for most investors of taking a long-term view. I think it’s easy to get scared by short-term volatility in the markets, but keeping a long-term view can help many people stomach short-term swings in price.

{ 3 trackbacks }

Previous post:

Next post: