The Top Ten Commandments To Being A Better Investor
The rules of the Ten Commandments are as important today as they were thousands of years ago.
With regard to investing in stocks, here are the top Ten Commandments of investing to follow that'll make you a better investor for years to come:
1. Think Long-Term
When you look at investing on a personal scale, it’s very rare for a sudden move in price to mean very much. Unless something catastrophic happens, things will balance out so be patient.
2. Invest What You Can Afford
Many people out there think that they need a lot of money to begin investing. That’s simply not true. Invest as much as you can while reducing the chance you’ll need to sell your investments to cover basic expenses. The goal is to always keep a few months expenses around in case something happens and invest the rest.
3. Buy What You Believe In
Don’t listen to the radio, don’t listen to a friend, listen to yourself. If you do not know or understand what you’re buying, don’t buy it. Even if you do understand it, only invest in something that you personally believe in.
4. Do Your Own Research
Maybe you like Tesla but if you don’t understand the electric vehicle (EV) business you either figure out how it works or don’t invest in it. Is the 5g business profitable? Are they innovators or just people talking about a possible product phenomenon? You get the point.
5. Set It and Forget It
We’re not Wall Street day traders so we’re not going to try and be like them. Invest in solid companies that has continued upside potential. The goal is to automate the investment process so you can spend your time living - not managing money.
6. Consistently Contribute
Hardly anyone can perfectly time the stock market and predict what the results will be each trading day. That’s okay because there is a powerful investment strategy called “Dollar Cost Averaging” that can beat timing. Contribute every month to your investments and it won’t matter if you buy at the top or bottom of the market. Over time, your portfolio usually do better.
7. Be Fearful When Others Are Greedy
The first half of this title comes from a favorite quote from Warren Buffet. When everyone is a winner you should be concerned. If you, your friends and your second cousin Nate are making quite a lot of money very quickly with their investments, this would be a good time to act very conservatively.
8. Be Greedy When Others Are Fearful
The second half of Warren Buffett’s quote is just as important. The best time to buy is when the world is in chaos and everybody is scared. Now, don’t be delusional - be realistic. The COVID-19 pandemic was terrible (still is) but it created enormous buying opportunities for investors.
9. Find and Remove Unwanted Fees
I’m sure you’ve notice how banks have come up with creative ways and try to trick you into paying fees. Be vigilant and cognizant when it comes to reducing your fees when buying stocks too. These days, many online brokerage firms often FREE stock trades. Check them out.
You remember this saying, right, “never put all of your eggs in one basket?” If it can fail, it will fail. Diversification is your investing 101 cheat sheet for riding the market. Invest in different industries so no single failure can ever shut you down.