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9 Things to Know to be a Successful Investor

Making a decision regarding investing a certain amount of your hard-earned money in the stock market will normally make you think twice.
papers and pen
Papers showing charts and graphs along with a pen, phone and tablet.

Being a successful investor is not an easy title to attain, and you should know that you are not alone in doubting the success rate, a lot of people decide against investing and would simply like to stick to their guns: saving.

Though investment has its own risks, there are still ways to counter them.

Whether you’re a beginner or a pro, it’s still important to know these 9 things in order to guide you to a successful investment.

  1. Keep your investing “tuition cost” low by starting small.

Your investing “tuition” is the amount of money you lose unavoidably on your first venture due to something you didn’t know or understand. So keeping your first investment small will help minimize that tuition cost and push you towards being a successful investor.

  1. Understand your investments.

It’s never safe to put your money on something you don’t truly understand, it can prove to be one of the fastest ways to lose the money you decide to put out on the market.

If you don’t understand the process of gaining profits from your investment – and can’t identify your risks – you just proved to yourself that you’re not ready to invest.

Put simply, you should study more, and if you end up still not fully understanding, you should just skip that investment entirely.

  1. Don’t put everything in one place.

Diversify. Don’t put all your net worth in one investment. Spread out your stock holdings as well through putting your investment first in funds that hold a bunch of stocks.

An example of this will be something like the SPDR Dow Jones Industrial Average Fund (DIA) – which holds 30 stocks, including IBM, ExxonMobil, and Wal-Mart – is a good, “one click” way to own a basket of stocks.

  1. Know what good return is nowadays.

If you ask yourself if a 5 percent return is good nowadays, then sadly, the answer is yes. In the past years, having a 5 percent return from an investment is considered bad investment but in this day and age, having a 5 percent return is acceptable and having something higher can prove to be more than worth the risk.

  1. History repeats.

Investors don’t easily learn this lesson. A good example of this will be the 2007-2008 bust in property prices. People thought that property prices will never go down back in 2006, but thought two years later that the property prices would never go up. The truth lies somewhere in between.

Just don’t forget that you want to sell an investment at times when it is expensive and everybody still loves it (housing in 2006), and you want to buy an investment when everybody now hates it (housing in 2008). Still…

  1. Don’t always fight the trend.

Regardless of the statement above, following the trend is still important when it comes to making money in investing. The odds of gaining profits from the shares you own is higher if you go along what most investors think will be profitable.

You wouldn’t want to catch a falling knife, would you? That’s considered gambling and not investing.

It’s instead better and safer to grab the knife by its hilt once it’s landed safely and settled down. In other words, don’t buy a stock that’s on its way down, buy something that has started to go up instead.

  1. Cut losses early.

There is a tried and tested route that every successful investor need to have in order to prevent massive losses. Something other than to set and stick to an exit strategy on every investment you make.

The simplest thing you could possibly do is to increase your portfolio’s value. And the best way to do this is to do a “trailing stop,”

A trailing stop is an order to buy or sell a security if it moves in an unfavorable direction.

  1. Wealth isn’t something gained overnight.

Remember this: risks are higher if your investment doubles your money in a month. A proper investment is something that has at least a two-year horizon. Something gained quickly can be lost just as quickly. Neglecting to adjust your thinking in line with this might end up making you lose a lot of money.

  1. When in doubt, don’t proceed.

If you have doubts regarding an investment that you would want to get in to, don’t do it. You could simply keep on reading and learning which in turn can keep your investing tuition cost low.

flower pots with money trees
Illustration of pails with money tree being watered with a watering can.

These things can be treated as rules if you want. And these are not just for the novices, every investor – even you experienced ones – should never forget to look back and go along with these rules.

Rules are made for a reason other than reading. Follow them, and you should be on your way to being a successful investor!

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