1) Select a strategy
2) Stick to it for decades.
Why?
For example, the simple reason for me is to allow the power of compounding to do its magic as I invest in quality dividend stocks. If you keep switching your investing methods/styles every few years, because you chase what is hot, you are not going to let compounding do the heavy lifting for you. In addition, if you have high portfolio turnover, your compounding will be negatively affected, because you will be paying more in commissions, taxes and fees.
Common Mindsets
Successful investors from around the world have similar wise practical principle of investing. It is not difficult to replicate their ways of thinking but you can certainly learn from their success mindset and select your own strategy and then just stick to it forever.
Similar Points To Consider While Buying Stocks
1. You need to post-analysis of all your moves in the stock market if you want to learn from your mistakes and successes. Only experience can make you an expert investor because there are no golden stock investing tips.
2. You can pick a winning stock only when you know how to perform both fundamental analyses. Investing is not the same as gambling or else Warren Buffet would not be successful in his long-term investing.
3. Winning stocks almost certainly have very strong earnings and sales. A novice investor can still choose the wrong timings and lose money because they had paid too MUCH for a good stock.
4. You should choose stocks from leading industry sectors in the beginning. Companies that have led the market in the recent past were also a part of such leading industry groups. Example of such companies like Apple and Google.
5. When stocks go up, it is never due to an accident! Do not let yourself believe in accidents or coincidences in the market. Stocks rise or fall abruptly only when big transactions take place or significant political events unfold. You can see this happening from the EU Greek crises.
6. You have to mentally accept the fact that you might lose money in the next few days. Even the most successful investors have lost money in the stock market. Just make sure that you don't lose your money without earning an even more valuable investment lesson!
7. Learning how to invest is a long process as you get to know your own way of investing. It never happens overnight and if someone tries to sell you a product that can help you make big money in the market, you need to run away from him or her - as fast as you can!
8. Beginners should always start with cash accounts. Margin accounts are not for novice stock market investors. Disciple yourself to save and then invest is the best.
9. You do not need a big sum to get started and as you can invest in small lots and get some experiences from the real stock market fluctuation and then feel the fear coming from Mr. Market and also share the sweetest of seeing your shares rising when Mr. Market is in a good mood.
10. You need to learn fundamental analysis to become a real investor in the next few months. You cannot rely on third party guidance forever if you want to be a successful investor someday. Learn and then you can earn, get it. If you need some inspiration, read about how this woman managed to turned a mere $5,000 into $22 Million.
11. The key to success is to study companies and learn their intrinsic value in the market! That's what separates a winner from a loser, who handles the same stock - sometimes on the same day!
12. Do not place any value on personal opinions of people. No matter which way you go, you'll always find people with mixed opinions. The most you can do is to listen to their opinions. In the end, it's your money and you alone have to make the decision.
Conclusion
Finally, just a note of cautious, there are several individuals whom I came to know who have become recent converts to index investing. Based on their documented history of chasing hot strategies, and chasing the best strategy, it is yet to be seen whether they will stick to their new strategy or not when things get tough.
After all, investing feels safest when a strategy is on a hot streak. When stocks have been going up for 7 years in a row, indexing seems like a no-brainer – you get market returns without really doing any work.
When I start getting feedback that I should just abandon all my stock picking altogether, and just index, I start asking myself if we are seeing a bubble in indexing that could go terribly wrong. Relying mostly on total returns like indexing is very easy, after stock markets have only gone up for the past 7 years.
It is yet to be seen whether; the investor who chases returns and jumps strategies will have the mental fortitude to stick to their plan during the next bear market.
