Making Money Consistently In The Stock Market
All the investing greats, be it Peter Lynch, John Singleton, or Warren Buffett, are considered greats because they not only made money in the stock market, but they made it year in, year out because they approach it with a long-term view. People who are just looking to make a killing in the short term often end up losing their shirt and then some. This is not what this article is about. If you want to learn about how to be a long term winner in the stock market, read on.
1. Be specific what your goal is. Want to retire comfortably in your own small house, doing what you enjoy? Want to put your kids through college first and foremost? Want to buy a boat and sail around the world? Decide what your primary goal is and fit various investment opportunities according to how well they match it. Having a laid out plan diminishes the risk of you reacting to market fluctuations and making irrational decisions. They are usually costly.
2. Devise a strategy. If you look up stock market investment strategies, it seems as if everyone has THE winning formula for success in the stock market. Obviously, they can't all be right, although there are some time-tested principles that all the greats have never strayed from. Find one of these strategies that you're most comfortable with, take it, and literally run with it. As in everything, you might come to a point where you have to improvise and make a little detour, but those moments should be the exception; changing your plan when a situation arises should never be the rule.
3. Determine potential risks. Make sure that you're able to correctly determine risks that undoubtedly come hand in hand with every opportunity. One way to do so is to look at your potential investments with as critical an eye as possible, and to devise your management plan accordingly. You'll be happy you did because you will be able to minimize your losses even in the event that a particular investment turns out to be a money-losing proposition. Notice how this step comes before profit assessment? This is to make sure you don't get overwhelmed with excitement before you size up the gamble you're taking.
4. Measure profit potential. One way novice investors lose out when they pick stocks that are winners is that they want to make the most money possible by selling at the top of the market. The problem is, there's no sure way to know when that time is. Your best bet is to have set profit thresholds where you sell to at least get your initial money back. You can then take more risks with the rest of the money. Knowing when to get out can avoid you huge losses.
5. Study possible alternatives. A little extra homework might unearth other investments that carry fewer risks or a better profit potential; or maybe there is another strategy that will make things simpler for you (and hopefully bring you a little more money in the process).
6. Scale the mountain. This step goes hand in hand with devising a strategy from the get-go. Every investment you make will have its unique challenges to optimize rewards and minimize losses. Anticipating them gives you a leg up that will allow you to achieve that exact goal.
7. Have your plan B ready. This one relates to point 4 and reinforces the need to have set thresholds, whether you're riding a winner or have to get rid of an albatross loser. You absolutely need to set specific boundaries as to when you should get out of an investment, either to prevent you from losing on your returns or just to avoid losing more money than you already have.
8. Choose the right investments. Investing takes time, so for one last time look over your new project as a whole. Now you've got all the pieces to see the puzzle as if it was completed, and can determine if this investment is really worth your time and effort. And if it isn't, there's no need to dwell on it: starting a new plan is certainly less painful than losing a couple thousand dollars because of an ill-advised investment plan.
9. Go for the gold. Once you decide to pursue an investment, don't second guess things. Give it all you've got and you'll probably come up a winner. Yes, it does sound clich, but even if things don't pan out for that investment, you won't be that big of a loser either because you had limits in place to limit your losses (see points 4 & 7). Steadfast resolve to follow your game plan will give you the best returns in the long run.
10. Debrief. At set intervals, go over your plan. If a couple of missteps here and there cost you a lot of money, try to identify them and make sure that you don't keep repeating them. Don't give up: we learn more from our failures than from our successes. Hang in there, make small changes; keep what works and discard what doesn't until you all your personal success ingredients come together and you carve out your very own formula for stock market riches. - 16931
1. Be specific what your goal is. Want to retire comfortably in your own small house, doing what you enjoy? Want to put your kids through college first and foremost? Want to buy a boat and sail around the world? Decide what your primary goal is and fit various investment opportunities according to how well they match it. Having a laid out plan diminishes the risk of you reacting to market fluctuations and making irrational decisions. They are usually costly.
2. Devise a strategy. If you look up stock market investment strategies, it seems as if everyone has THE winning formula for success in the stock market. Obviously, they can't all be right, although there are some time-tested principles that all the greats have never strayed from. Find one of these strategies that you're most comfortable with, take it, and literally run with it. As in everything, you might come to a point where you have to improvise and make a little detour, but those moments should be the exception; changing your plan when a situation arises should never be the rule.
3. Determine potential risks. Make sure that you're able to correctly determine risks that undoubtedly come hand in hand with every opportunity. One way to do so is to look at your potential investments with as critical an eye as possible, and to devise your management plan accordingly. You'll be happy you did because you will be able to minimize your losses even in the event that a particular investment turns out to be a money-losing proposition. Notice how this step comes before profit assessment? This is to make sure you don't get overwhelmed with excitement before you size up the gamble you're taking.
4. Measure profit potential. One way novice investors lose out when they pick stocks that are winners is that they want to make the most money possible by selling at the top of the market. The problem is, there's no sure way to know when that time is. Your best bet is to have set profit thresholds where you sell to at least get your initial money back. You can then take more risks with the rest of the money. Knowing when to get out can avoid you huge losses.
5. Study possible alternatives. A little extra homework might unearth other investments that carry fewer risks or a better profit potential; or maybe there is another strategy that will make things simpler for you (and hopefully bring you a little more money in the process).
6. Scale the mountain. This step goes hand in hand with devising a strategy from the get-go. Every investment you make will have its unique challenges to optimize rewards and minimize losses. Anticipating them gives you a leg up that will allow you to achieve that exact goal.
7. Have your plan B ready. This one relates to point 4 and reinforces the need to have set thresholds, whether you're riding a winner or have to get rid of an albatross loser. You absolutely need to set specific boundaries as to when you should get out of an investment, either to prevent you from losing on your returns or just to avoid losing more money than you already have.
8. Choose the right investments. Investing takes time, so for one last time look over your new project as a whole. Now you've got all the pieces to see the puzzle as if it was completed, and can determine if this investment is really worth your time and effort. And if it isn't, there's no need to dwell on it: starting a new plan is certainly less painful than losing a couple thousand dollars because of an ill-advised investment plan.
9. Go for the gold. Once you decide to pursue an investment, don't second guess things. Give it all you've got and you'll probably come up a winner. Yes, it does sound clich, but even if things don't pan out for that investment, you won't be that big of a loser either because you had limits in place to limit your losses (see points 4 & 7). Steadfast resolve to follow your game plan will give you the best returns in the long run.
10. Debrief. At set intervals, go over your plan. If a couple of missteps here and there cost you a lot of money, try to identify them and make sure that you don't keep repeating them. Don't give up: we learn more from our failures than from our successes. Hang in there, make small changes; keep what works and discard what doesn't until you all your personal success ingredients come together and you carve out your very own formula for stock market riches. - 16931
About the Author:
Before you start investing, make sure you read our extensive stock market success article. You can also find more general finance advice on our personal finance blog, Money Galaxy.
posted by Edgar at
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