If you stumbled upon this article, chances are you want to know the secret source about investing and trading. If that is the case, then you probably found the right article to get you on the right path in no time. What we created in this article is a list of investment maxims that can improve your edge. Obviously, the points below are not some money-making guarantees, but rather a collection of things that successfully worked for other people.
Focus and Concentration
This is obviously a very broad thing to say, but we need to start the list with this point. What we mean by focus and concentration is that successful trading and investing is not a walk in the park. In fact, only around 5-10% of professional money managers are able to beat the market over 15 years. Let’s frame it the other way: 90%-95% of the pro’s fail to beat the market.
For that reason it is crucial to spend a substantial amount of time learning the craft, whether you want to day trade or invest over a long period of time. We think it is best to dedicate at least one hour of your day to investing and actually sticking to only a few stocks or markets. For a non-professional investor the mantra should be: Less is More. It’s better to become a master in one sector, than to be a fool in many sectors.
Invest in Your Best Ideas
Also, following your previous point, pursue the investments where you have a high conviction. Research shows that trades where you are not fully sure tend to perform much worse. So, if you want to perform better, stick to your best ideas.
Assess Quality and Stick to Your Standards
Yes, there are many examples where people have made millions of dollars of random cryptocurrencies or stocks like GameStop. Yet, these are exceptions to the rule. Risky investments like that should only be done with money you're willing to lose. It is more like a gamble, than an investment as you know that you’re just trying to ride the hype wave.
Perhaps it is a rather boring approach, but sticking to high standards might give you an edge. Always remember to stick to quality assets. That does not mean that these assets will always be trading at higher multiples and you will never have a chance to buy them at cheaper prices. It just means that you have to be patient and not give in to your emotions or a certain market sentiment - keep to your standards and to your plan until the end.
Evaluate Management Integrity and Track Record
Similar to the point of quality and standards, keep an eye on the management of the company. Obviously it might be difficult to assess it, but it is very important. Look at the job they did at their previous company and look for clues if their incentives are actually aligned with the company. There have been many cases where seemingly successful companies were led by crooks. Think of Wirecard, Theranos or FTX. Do not be fooled, the history book is full of such examples. Try to look for authentic and transparent companies that have a strong track record in other companies.
Use The Right Tools
Have you ever seen a Formula 1 driver in an old car? No, neither did we. What we want to say is that you should also use the appropriate tools when trading or investing. Why just limit yourself to reading the news, start improving your skill set. Learn how to effectively use candlestick patterns, incorporate Stop-Losses and Take-Profits. Also, do not forget that you can actually peek into the trading ideas of big investors, everything is made public and you can learn from the best.
Be Patient, Avoid Short-Term Compromise
In investing, patience is key. It's essential to stick to core principles, even when faced with attractive distractions. Going against our values for quick gains isn’t sustainable. It can be harmful in the end.
Understanding Long-Term Investment and Market Dynamics
Stocks can be volatile in the short term. But, they tend to be strong investments over time, often beating bonds. Small-cap and value stocks tend to do well. But, IPOs often fall behind. It’s crucial to grasp these market dynamics. Recognizing the ongoing shifts in top market players is vital for smart investing.
Navigating Economic Changes and Disruption
Industries change fast, and disruptions bring risks. Keeping a close watch on economic trends is a must. The stock market hints at economic shifts ahead of time. This insight helps us adapt our strategies as needed.
Sticking to Investment Strategies and Principles
What are some easy investment strategies and principles to stick to? Well, if we follow the trading school it’s to choose high liquidity assets and assets that show certain volatility, to get higher gains. When we look at investing, quality investors tend to invest in companies with strong free cash flow. Let winning stocks grow and buy more of underpriced stocks. The growth in earnings is a key factor in stock values. It should be a key factor that shapes your investment decisions and strategies.
Inflation, Economy, and Timing Investments
Stocks can be a good protection against inflation. They safeguard our capital over the long haul. Timing the market is tricky. Yet, knowing when to invest and being cautious when others are eager—and eager when others are cautious—can give us an edge.
Maintaining Discipline and Following Rules
Setting strict rules and following them is crucial. It stops rash decisions and keeps our portfolio healthy. We know that trading too often usually leads to lesser returns. So, we promote discipline and a thoughtful investment approach.
Recap
So, you've read this to find some tips on investing, right? This article isn’t a magic money recipe, but it does have good advice. Focus on learning, pick one area and get really good at it – Less is More, remember?
Invest in ideas you really believe in and stick to quality, even if it seems boring. Be careful with company leaders – some can be tricky! And use the best tools and tricks – learn from the pros.
We all know that the market can sometimes go against us, but play the long game and keep an eye on the big picture. Be disciplined, follow your rules, and don’t rush. In simple terms, it’s all about being smart, patient, and staying true to what you know is good!
