6 Quick Rules for Successful Stock Investing
- Successful investing depends on personal discipline, not on whether the crowd agrees or disagrees with you. That’s why it’s crucial to have a solid well-grounded investing philosophy.
- Don’t buy a stock unless you understand the business inside and out. Taking the time to investigate a company before you buy the shares will help you avoid the biggest mistakes.
- Focus on companies with wide economic moats that can help them fend off competitors. If you can identify why a company keeps competitors at bay and consistently generates above-average profits, you’ve identified the source of its economic moat.
- Don’t buy a stock without a margin of safety. Sticking to a strict valuation discipline will help you avoid blowups and improve your investment performance.
- The costs of frequent trading can be a huge drag on performance over time. Treat your stocks buys like major purchases, and hold on to them for the long term.
- Know when to sell. Don’t sell just because the price has gone up or down, but give it some serious thought if one of the following things has happened:
- You made a mistake buying it in the first place.
- The fundamentals have deteriorated.
- The stock has risen well above its intrinsic value.
- You can find better opportunities.
- It takes up too much space in your portfolio.
Stock market investing goes beyond a simple checklist.