For many, investing seems nearly unobtainable. But it is not. If there are 15 year old kids doing it- so can you! There a plethora of investing tips on the internet, some compiled by those who have never invested in their life!
So I have to cut through the madness to give my top 5 investing tips, compiled based on nearly 15 years as a personal and professional investor.
Why are there so many investing tips out there?
You are probably looking at the Google results for your catchphrase of ‘Investing tips’ or something similar. You have read, you don’t know how many blogs, with different investing tips and tricks, yet they all have one thing in common. They are all contradicting themselves and others.
Most of the time, this is nothing malicious or meant to cause your investments harm. After all, the French markets work different from the American, and the German works different from the Swiss one.
But occasionally, you get a blog talking about investing tips, yet none of the writers or editors have ever invested, themselves!
So what exactly are my top 5 investing tips?
5. Wait for the market to drop
It’s tempting, I know. You have saved and saved and saved. You now have enough money to begin investing. But you need to wait. This is one of the most vital investing tips to know!
Some blogs will have you believe that this is the best strategy to go for. You have money, so invest it, to start compounding. Whilst this is a good strategy on paper, it is devastating for your investment portfolio.
Unless you can find a seriously under priced stock during a bull market, it’s better to keep your money in your pocket. This is because, else, you are likely paying over the odds for the stock, and will thus have less when the next recession comes.
When you are investing, the whole point is that you keep your money compounding in your favor. The more stocks you have, the more compounding you will have.
When you wait for a correction or a recession, you enable yourself to buy more stocks. Think of it like this:
I have $5, if I buy eggs now, I will be able to buy 48 eggs. If I wait until next week until I buy eggs, and go without them for a week, I will be able to buy 96 eggs!
The same applies to investing. By waiting for a recession/correction, you allow yourself to buy up to twice (if not more!) times as many stocks as you would’ve before!
As Warren Buffett once said:
When it’s raining gold, reach for a bucket, not a thimble!
4. Pick companies, not stocks
Eh?! Don’t pick stocks when you are investing in the stock market! Are you mad?!
No, we are certainly not mad.
It may be tempting to read a report from Bloomberg, Forbes or another outlet on ‘The best performing stocks of this year!’ Find the first one, and invest all you have into it.
Wrong move.
You have fallen into a trap. These stocks likely won’t go back up in price. As it says in the Wolf of Wall Street:
By the time you read about it in the newspapers, it’ll be too late!
This is so true!
When you are coming in to invest, don’t think like it’s you buying a few stocks of a company. But the whole company itself. Or at least, as though you are buying a large portion of it anyway.
Remember this: when you buy a stock, you are buying a part of that business.
You want to know everything there is to know about it. You would want to screen potential business partners before you went into business with them. So do the same with your company’s executives!
You’d want to know the core areas of where a business makes its money, you should know the same for your investment too!
Essentially, you need to know that business like the palm of your hand. You need to know it, inside, outside, back to front, even more than the executives know it!
3. Stop ‘Helicoptering’ your portfolio
I have to admit, I did this for the first six months. But it is one of the best investing tips I can give you. Stop doing it!
What exactly is ‘helicoptering’? Good question. Helicoptering is where you hover over your portfolio, spending hours watching the daily fluctuations of your portfolio.
A little helicoptering is of course, necessary to maintaining a strong portfolio. But this should be done on a quarterly-basis, when you receive your quarterly report!
Spending too much time focusing on your short-term fluctuations will cause you to make rash decisions. It can cause you to focus too much on the share price, and not as much on the underlying value of the company.
It is very rare that the temporary fluctuations in price (such as large surges or decreases in price) actually reflect the value of the company. It’s up to you to stay focused, and know when a company’s temporary fluctuations are a sign of worse to come.
Ie. If the whole markets are down, it’s your time to buy, not sell!
2. Plan ahead
The stock will go up, the stock will go down. So you need a game plan for when the stock goes up and for when the stock goes down.
Before you buy a stock, think:
What will make me sell?– New CEO coming in, losing a main core of the business, losing a major client, a new viable competitor enters the market. Make sure though, that you are thinking long-term, and not just short-term. It could even be that the stock is too high, and you want to sell it, before the inevitable crash comes!
What would make me buy more?– Acquisition of a new arm of the business, gaining of a major client, acquisition of a major competitor, CEO brings in new plans for the business. Again, make sure that you are thinking about the long term, not just your short-term gains!
Create a game plan is one of the best investing tips I can give you. Without one, you are bound to lose in the end.
Remember, you are not only trying to get more stocks, and more compounding. But also, to beat your competition.
After all, the stock market is just a massive game of chess. It’s just supply and demand, you need to know what’s going on, before your competitors even find out!
1. Remove your emotions from the markets
The markets are incredibly volatile- more so than people give them credit for! The markets are also one of the most emotional places on Earth!
The second you see the red, your brain tells you to sell before the price goes down any further! But the second you see the green, your brain tells you to buy more before the price goes much higher!
Rarely, if ever is this logical.
This sounds incredibly simple, and is one of the most logical investing tips. Yet it is so hard to actually implement!
If you’ve heard the old adage of “Trust your gut.” you should already be familiar with one of these investing tips!
In investing, always trust your gut. That is by far one of the best investing tips anyone can give you.
The second you let your head start making decisions, you’re a gonner!
Have you ever made any of these errors? How did you correct them? Tell me in the comments!
