Tips for Investing Success (Part 1)

Fotolia_54867638_XS_7This two part series offers some tips for you to consider if you’re thinking about investing in stocks and shares. It is not intended as a definitive statement on all you need to know about investment. However it offers some guiding principles that you might want to bear in mind. So here are Tips 1 – 10:-

1. Buy low; Sell high.

2. Don’t chase performance. If you judge a stock or fund to fit within your investment strategy, then buy on the dips.

3. Run your winners. Let any profits roll up and don’t be in too much of a hurry to say goodbye to your best-performing investments.

4. Cut your losses before they become excessive. When buying a stock establish a ‘stop loss’ figure beyond which you won’t let the price drop before you sell to minimise your loss. In my opinion if a stock loses 25% of its value, particularly in a rising market, then that is a significant warning sign and I would seriously consider selling to avoid further loss at that point. Occasionally I might get wrong but mostly that philosophy has stopped me losing even more money.

5. Never get emotionally attached to any stocks and shares you own. You have to be very business-like and hard headed. If you judge it to be the right time to sell then act and act quickly.

6. In general, think long term. As the great Warren Buffett once said, “Never buy a stock unless you would be happy with it even if the stock exchange closed down for the next ten years.”

7. However that doesn’t mean you shouldn’t review your stock portfolio occasionally. You should be reviewing your portfolio regularly. Make sure there are no ‘dogs’ and make sure that there is some balance in your portfolio too.

8. Reinvest your dividends. The power of compounding will make an enormous difference to your overall returns.

9. Don’t put all of your eggs in one basket. Simple idea but one which a surprising number of people ignore. Diversification will help you to limit your risk profile.

10. Holding for the long term can be a good strategy. However that doesn’t mean you want to hold a stock forever. It’s not a good idea to buy a stock and then forget about it. Essentially stocks and shares are for buying and selling. At some point it might makes sense to sell. When you reach that point, act.

© RJ Sutton and Mann Island Media Limited 2014. All Rights Reserved.

Show Buttons
Hide Buttons