Hello and welcome back to the 4th and final part of our 4-part blog series on investing tips for the new investor. If you’re just joining us you are about to get some of the best advice that a new investor could want before beginning their stock investing career. If you’ve been with us since Part 1 then you know that the advice and tips that you are about to get today are going to be more of the same excellence that you’ve seen in parts 1 through 3. So, if you’re ready, let’s get started. Enjoy.
- Safety nets, anyone? If you have a time machine then it’s going to be easy for you to make excellent, sound stock purchases. (And please contact us because we’d like to go back into the past and fix a few things.) Of course, since time travel hasn’t been invented yet the best way to make sure that you don’t get burned on your stock investments is to always have a wide margin of safety so that, if the future holds problems for some of your stocks, you’ll be protected.
If you’ve been keeping up with recent stock news you’ve probably seen that a safety margin is something that most excellent investors have, and this is not by accident or because they have a time travel machine, it’s because it was planned.
- If you see lemmings, go in the opposite direction. There is a lot to be said for following the crowd but, in our humble opinion, the best investors are the ones that aren’t afraid to go in another direction. The reason being is simple; sometimes the crowd happens to be wrong.
- Temper, temper. Another trait that excellent investors have is that they have not only a high degree of intelligence but also a stable temperament that allows that intelligence to overcome any problems that their emotions may cause. This allows them to buy stocks at the bottom and sell them at the top on a regular basis. (That’s a good thing, btw.)
- Discipline is vital. It can be very easy to lose your cool when one or several of your stocks are wildly swinging up or down. It is at these times that the best investors show the most discipline and lose the least amount of money. An excellent example of this would be financial guru Jim Cramer. During 2008 he advised all of his investors to take any money that they might need for the next five years out of the stock market immediately because, in his expert opinion, things were headed south and weren’t going to be coming back anytime soon. If he would have shown a little bit more discipline (and we’re sure that today he would) he would have seen that the exact opposite was true and that 2008 was one of the best times to get into the market because practically everything started going back up that year.
If we can be frank for just a moment we would like to say this; investing in the stock market is not for the weak of heart or the weak of mind. Just like with anything else in life if you want to become a stock investing expert you will need to educate yourself, practice investing, have enough financial strength to survive if things don’t always go your way and have the wherewithal to be able to look at any business and any stock with unbiased clarity.
If you can do this you will certainly be ahead of most investors, many of whom play the stock market like a child plays with her toys, meaning that they are completely interested and fascinated at one moment and then completely uninterested the next. Investing in the stock market is a serious endeavor and should be treated as such. Unless you have a lot of money to waste you will definitely want to do your homework and your due diligence before jumping in with both feet.
We hope you enjoyed this four-part blog series and that it was the beginning and not the end of your stock investing education. Best of luck with your investing and please be sure to come back and visit us often as we will be presenting more information in the future about all sorts of financial endeavors. Take care until next we meet.