You could spend a lifetime learning about investing, and still not know everything about the subject. Luckily, you don't have to be a know-it-all to make money in stocks over the long haul -- and retire rich.
Aspiring investors often get excited about getting a handle on the stock market -- until they look at pages of stock listings. With so many investments to choose from, the idea of somehow going through thousands of companies to find the single best one can seem just about impossible.
Of course, you could just give up on individual stock investing and find a mutual fund that will make stock picks for you. Unfortunately, though, that doesn't make anything easier -- you'll still have to decide which of the thousands of different funds you want to buy.
But don't get frustrated. Just remember one thing: You have to start somewhere. But where you start doesn't make a huge difference, as long as you don't give up entirely. There are opportunities everywhere.
Limiting your focus
The world's best investors understand that when it comes to deciphering the financial markets, different people have different strengths and weaknesses. Even Warren Buffett, whom many view as the consummate all-around investor, decided in the late 1990s that he was ill-equipped to invest in even more-established technology stocks like Microsoft
Now, many credit Buffett's decision not to invest in technology as a prescient move, given the bust that followed the tech bubble. Yet the important thing to take away from Buffett's decision isn't that he avoided losing money -- especially since many other investors managed to ride the early tech wave to a decade of gains in many stocks.
Despite pre-bust criticism that Buffett was unable to adapt to a changing world, his fundamental decision was correct. Instead of jumping into something he didn't understand well, he stuck with industries he grasped better, and found profitable opportunities. He didn't have to become a tech expert in order to make money.
Where to start
Of course, Buffett has plenty of expertise in a variety of industries, so deciding to ignore a single sector didn't limit his scope very much. If you're just starting out, though, you may not have much knowledge about any stocks at all.
Another successful investor who has thrived by focusing on his strengths is Bruce Berkowitz of the Fairholme Fund (FAIRX). Berkowitz owns many well-known names, including Pfizer
Where you should start investing depends on what motivates you. Think back to that first spark of interest that made you explore investing, and you'll often find out what inspires you most about the financial markets. For some, a particular sector of the market may be most appealing, especially if it mirrors their own career experience. Those who work in the computer industry, for instance, have a head start in researching tech company stocks.
Once you figure out where to start, the nice thing about investing is that nearly all the knowledge you gain analyzing one stock or sector will help you in researching others. Also, looking at mutual funds gives you insight on how professional money managers invest and can teach you lessons you can use in your own investing down the road.
The sheer size of the financial markets can be overwhelming, but don't let it stop you from becoming a successful investor. With the markets as volatile as they have been lately, knowing more about your investments can mean the difference between making money and losing a bundle.
If you want good stocks with healthy dividends, look no further. Adam Wiederman can point you to the best yields for the next 10 years.
This article was originally published on Sept. 26, 2008. It has been updated by Dan Caplinger, who doesn't own shares of the companies mentioned in this article. eBay is a Motley Fool Stock Advisor recommendation. Intel, Microsoft, and Pfizer are Motley Fool Inside Value recommendations. Motley Fool Options has recommended a diagonal call on Microsoft and buying calls on Intel. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy informs you well.
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