Patience
To select the right stocks and reap the rewards of selecting them you need to be patient. Firstly you need to research the stocks patiently and take the most important success factors into account. Has the company’s stock been successful for at least five years? Do investors and the general public have a favourable opinion about the company? Their perception is crucial to the stock price and therefore it must be monitored carefully. Read news articles about the company and listen to experts’ analysis of the company. The most important success factor is if the stockprice fluctuates often.
Patience does not only apply to researching the stock obviously! After purchasing shares in the company you believe is going to succeed it is important to know that that success may take a long time. Therefore you need to continue to believe in your selection regardless of the outside world’s opinion regarding the stock.
Separating the Stock from the Company
The stock and the company are two different things. Why does the stock price not align with the company’s actions sometimes? This is because stock share prices are based upon predictions, revenue, announcements etc. When a company’s earnings report for Q1 is released for example, it was predicted that the company would earn 1.7 billion dollars in revenue, but the company just fell short by earning 1.68 billion dollars.
This in turn will cause the price to drop, because investors expected the company to do better and are now worried about the company’s future. The same goes for announcements if Ford announces it bought the Bugatti division of Wolkswagen as a hypothetical the share price of Ford would go through the rough. However if Ford announces that it has been decided to let some workers go the share price will fall. It is all about how the company looks to the outside world, its earnings and predictions.
This is exactly why I don’t conflict the two and it has brought me massive success. So many investors make this mistake and it is costing them money. Fortunately for you mistakes never happen twice if you identify them.
Set Goals
Becoming a successful investor is not only about researching and strategising! Being goal oriented is a fundamental part of it according to m1.coms article called Better investing: How to make better investment choices.
Having an objective with your investing in mind is critical to be able to measure how much risk you’re willing to take on. Don’t ever adopt one of your friends, family or colleagues strategies to each his own. You need to do your own research, strategizing and planning. Start out with looking at business financial statements and specifically look at return on equity, dividend payouts and expected growth.
In order to set goals you need to analyse your own hopes and dreams to set good goals for yourself. Goals are important, because they are a way for you to measure your progress and hold yourself accountable.
Always Take on New Knowledge
No one knows the answer to every question! You always have to acquire new knowledge to become better at the things you are doing. It doesn’t matter if you are one of the best investors in the world like Warren Buffet.
However, do not learn the same lesson twice! In an article called How to Become a Better Investor — 20 Ways to Improve you should have a journal or a paper at your disposal where you can write down what you have done, what worked better and what did not work as well. Make sure to look over this paper or journal so you don’t make the same mistake twice.
So how do you learn?
The best way to learn is by reading books and consuming knowledge on a regular basis. Some of the best things that I have learned during my investing journey I have learned by reading books.
Nevertheless you should not underestimate how good it is to learn from experience. Never be dependent on theory, because in theory everything is supposed to work a certain way, but life doesn’t work that way. Therefore it is critical that you apply the knowledge that you learn from reading the books about investing or else you will never learn.
Always Selling at a Certain Percentage of Profit
From now on always decide what percentage of profit you want to sell the stock at and stick to that rule. Before I implemented this rule I lost very much money from getting greedy and believing that the stock would go up higher and it plummeted. Make your money grow and not disappear. Don’t get upset with yourself if the stock goes up more after you sell. Remember at least you made money. Some people panicked and sold their stock as soon as the Bear Market hit or there was a red day.
Summary
The key factors for successful investing are patience, separating the stock from the company, setting goals, acquiring new knowledge, and always selling at a certain percentage of profit.
It is also crucial to research and monitor stocks carefully, as well as avoiding emotional decisions and sticking to a strategy. Additionally you need to continuously learn and adapt to changes in the market.
