Hello, lets get started.
So the stock market is simply a machine for transferring money from the impatient to the patient.
Why am I telling you this?
- Not being patient
Well, most people don’t have the patience to make it big in the stock market. You see, patience is a discipline and it requires a lot of mental fortitude to sustain. The markets will typically have short term fluctuations and these fluctuations will lead to people selling and buying stocks. You want to be that investor who invests and ignores the markets for years, if you can hold for years. You’ll make money and you’ll make a lot more than you think. The stock market massively rewards patience and the growth of your money can be exponential.
2. Ignoring the future prospects of a business
Many people ignore the future prospects of a business and prefer to trust tedious data or trends, or even news to make an investment. This is not the right approach, you want to be focusing your efforts on creating a prediction in regards to how the business is going to perform: this is how you make the big money. You predict the future of a company and if you are right, you make money.
3. Trying to time the market
Of course there are times you should sell and times you should buy, but the key is to position yourself to let the market reward you for success. Focusing on timing the market is what leads to creating huge success in the stock market. Do not time the market, ride the wave that comes along with being in the market. If you are patient enough, a good wave will catch you.
4. Not applying a margin of safety
A margin of safety is the difference between the price and value of a stock. You have to be able to apply a strong margin of safety and you create wealth. You can’t be buying things and not applying this concept or you are putting yourself at risk of losing money.
The only rule to investing is to not lose money.
Buy them cheap, hold for the long term and apply a margin of safety and you make money.
5. Diversifying to early
People tend to view diversification as a means of reducing risk and yes it works to some extent, but when you are in early stages: you want to focus your efforts on finding a few bargain issues and gems in the stock market. You do not want to branch out too wide, too early.
Diversification is not necessary, if you know what you are doing. There are many billionaires who agree…
Focus on a few sound investments, not a basket of average ones…
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Thanks for reading,