Building Confidence As An Investor

Investing in a diversified portfolio makes financial sense and having short-term financial goals with an eye to long-term investment is a sound way to ensure a secure future.

But how do you develop the kind of investment strategies that will help you to invest with confidence? We’re going to take a look at why it’s important to be a confident investor and provide you with strategies to build your investor confidence. 

Strategies for Building Investor Confidence

To help overcome any challenges or fears in knowing where and how to invest, keep in mind the following suggestions: 

Understand the market

Investor confidence is built on the understanding that the market experiences ups and downs and that volatility is perfectly normal. We all know about the stock market crash in October 1929, but did you know that there have been 25 bear markets (a decline of at least 20%) since 1928? The market has recovered every time. 

A more recent example of stock market volatility occurred just as the pandemic broke out. Markets took a sharp downturn and there were a lot of doomsayers with bleak predictions. But, as it always does, the market recovered and stock values were restored, all before the end of 2020. A calm and cool head will prevail during a downturn - just wait for the market to predictably recover.

Identify your financial goals

When you examine successful people, you discover they had their eye on the prize and had defined benchmarks to be reached along the way. This methodical strategy is also necessary for investing. 

Long-term financial goals are important and setting short-term financial goals provides benchmarks that keep you on track and help to evaluate your progress. For example, home ownership is a common long-term goal for many people. A short-term goal can be saving money for the down payment by planning to cut discretionary spending, pay down high-interest debt, and set aside bonus monies (gifts, raises, etc.).

Being debt-free is a reasonable long-term goal and paying down debt is another great example of a short-term goal. The plan can include listing debts, paying off high interest credit cards, and building extra payments into your mortgage.

It is remarkable to realize how much money you save by paying off high-interest debt. Other short-term financial goals can include creating and abiding by a household budget, having an emergency or rainy day fund, cutting spending, planning for a vacation, and of course, starting to invest.

Research Investment Strategies

There are as many investment strategies floating around as there are people with diversified investments. Some are good and others not so much. Research will help to educate you about successful investing practices and avoiding common pitfalls.
A few of these successful investment strategies include:

• Buy and Hold

This is a strategy that has an eye to long-term investing - you buy and hold onto the investment indefinitely. The intention is to never sell but if you do, it won’t be for a minimum of 3 to 5 years. Buy and hold frees you from obsessively watching and worrying over the market and you also get to avoid capital gains taxes which can put a big dent in your returns.

• Income Investing

These investments, such as bonds and dividend stocks, result in cash payouts. Investors can accept the cash or reinvest the payout. By using index funds you don’t have to pick and choose individual stocks and bonds and income investing tends to experience fewer fluctuations compared to other types. 

• Dollar-cost Averaging

Adding money to your investments at regular intervals is what dollar-cost averaging is all about. You may determine that you can afford to invest $400 a month (or $100 a week) and so you invest that amount no matter how the market is behaving. This kind of investing ensures that you get an average purchase price over time and keeps you from buying too high. This is a very disciplined approach to investing and tends to result in a larger portfolio. 

You’ve already added to your investment knowledge just by reading about these three investment strategies and likely have felt your confidence grow. Education results in knowledge,  and knowledge is power! 

Good online resources for learning about investing include podcasts, company websites, and financial news and magazines. Beware of information that doesn’t honestly evaluate risks because every investment, even the ones that are considered “safe” come with some level of risk. 

Evaluate Risk with Asset Allocation

Imagine your money as a dozen eggs in a basket on a table. If the basket gets dropped, all your eggs get broken, right? Now picture yourself placing 3 eggs in one basket, 6 eggs in the next basket, and 3 more in a third basket. You have determined, or allocated, where your eggs go and minimized the risk of losing all. This is asset allocation.

The next step is to diversify. If the table with those 3 baskets of eggs collapses, you will lose all the eggs. However, if one basket is on the table, another on the counter, and a third on the porch, you end up losing only a few eggs.

Diversifying your portfolio is the same idea - directing your funds into varying investments and asset classes and then periodically rebalancing (readjusting) those investments. Investors usually think of asset allocation in terms of percentages - what portion of your total portfolio will be invested in classes such as stocks, bonds, cash, or cash equivalents. Each has different levels of risk and responds in varying ways to the market - the strength of the portfolio is found in diversification. 

This asset allocation calculator is a good tool to get you thinking about your risk tolerance and to tailor how you allocate. Understanding that risk is inherent in investing helps you to become a more confident investor. 

The closer you are to retirement, the less risk you should take with your portfolio. Average risk takers will have 40% to 60% of their assets in stocks and the rest in bonds. 

Consider Long-Term Investments

Long-term investing is an important strategy. While there is no hard and fast rule about what constitutes long-term investing, it’s generally accepted that an asset will be held for at least a year. 
There are many types of long-term investments including:

     1. Growth stocks
Most often associated with tech companies, growth stocks promise high growth and high returns. Their high volatility demands that investors have a high-risk tolerance or be willing to hold the asset for three to five years.

     2. Stock funds
A fund company will offer a collection of stocks for a fee and this type of investing is attractive for someone who is interested in stocks but doesn’t have the time or knowledge to research and buy them individually. 

     3. Dividend stocks
These stocks pay out regular dividends or cash payments. They produce passive income and are a good choice for buy-and-hold investors. Dividend stocks are typically associated with more mature companies and lean towards being less volatile than growth stocks.

     4. Real estate
This is the prototype of long-term investments. Real estate investments are attractive because you can borrow the bank’s money and pay it off over time. Owning property allows you to be your own boss and you can enjoy the numerous tax benefits of being a property owner. 

     5. Small cap stocks
These are the stocks of small companies and will often grow quickly because they capitalize on an emerging market. Amazon started as a small-cap stock and investors who have held onto their investments became very rich. Small companies tend to be more volatile than larger, established ones and investors may see drastic price movements. 


Long-term investing requires a commitment to staying the course and not being distracted by the news or trends. When you understand risk you aren’t tempted to react and prematurely pull your money out of the market. Hang in there - you want the power of compounding.

Diversify and Strengthen Your Portfolio

Earlier, we touched on diversification but it’s worth repeating. By diversifying your portfolio you are helping to strengthen it. Choose investments that haven’t behaved the same way or gone in the same direction so that if one is declining, it’s unlikely that the others are as well. 

Spread your assets across stocks, sectors, and geography, and mix up the styles you invest in. When investing in bonds, add those of varying maturities, credit qualities, and durations. Remember that diversification adds a layer of protection during a bear market. 

Once you have set up your portfolio with the right mix of stocks, bonds, and short-term investments, your job isn’t done. You must check in periodically to ensure that your diversified investments are on track to meet your long-term goals and if they aren’t, it’s time to make adjustments and rebalance. 

Wrapping Up: Invest with Confidence

Building confidence as an investor isn’t difficult but it does require a few thoughtful and measured actions. The first and most important step is to understand that the market isn’t stagnant and that it is an entity that has ups and downs. Dig into a little of its history, and you’ll see the movement is normal.

Identify your long-term and short-term goals and then research the different types of investment strategies that seem most compatible with your goals. Assess the risk of each investment and have an eye on the long-term. Remember that diversification helps to reduce risk and that once your portfolio is established, you will need to occasionally adjust and rebalance.

Investment opportunities at Connect Invest

Connect Invest offers opportunities for investors looking to diversify their portfolios. Through short notes, you can invest in real estate debt that funds various residential and commercial real estate projects. 

Our short notes have terms ranging from 6, 12, and 24 months. Unlike bonds, short notes aren’t traded publicly and therefore don’t have a “price.” You earn high-yielding fixed-rate passive income and when the note matures you have the option of re-investing. 

In just a few minutes you can set up your Connect Invest account with a minimum investment of $500 and no additional fees. Connect Invest’s model can offer returns that are greater than most traditional bank products. 

Learn more about our high-yield, short-term investments here. Our team is standing by and ready to answer any questions that you might have!