Being A Long Term Winner In The Stock Market
If you want to make consistent money in the stock market, you can't afford to play it by ear. You have to have a game plan, and you have to be in it for the long haul. If what you're looking for is shortcuts to make a quick buck in the stock market, this is not the article you need to be reading. With this out of the way, let's move on to the ten steps to consistently making money in the stock market.
1. Set your goal. Take your personal factors into consideration to come up with the type of portfolio that best suits you. Then analyze every potential investment by thinking about what you want out of it and whether or not it fits into your overall investment plan. Just like a sports coach, have your X's and O's ready, don't react to the market. This will save you a lot of headaches and money.
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. Assess possible risks. Your ability to assess the risks your investment carries will be critical to your success. The key here is to look at them realistically, not with wishful thinking. Your management plan must be as effective and practical as possible in order to minimize your losses and in turn maximize your profits. This step is to be completed BEFORE evaluating profit potential, to avoid you getting so excited about your potential profits that you fail to properly evaluate the risk you'll be taking.
4. Think about profit potential. One of the hardest parts about investing is knowing when to cash out once you're riding a winner. You should have a set threshold where you sell off enough to at least recoup your initial investment, and then ride the profits as long as you can. Know when and how to get out.
5. Keep an eye out for comparable opportunities. Do a little more research. Check to see if there are other investments that have fewer risks, a better profit potential, or if there are is another strategy that will make your life easier (or hopefully a little richer at the end of the day).
6. Evaluate the hurdles. This falls right in line with having an initial strategy that you follow from the beginning. Every time you consider an investment, it will bring about its very own unique characteristics, and its risks. If you have already gone through the process of anticipating those risks, you stand a much better chance of minimizing the risk of losing money.
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. Make the right choice. Investing is time-consuming, so before you jump in, take one good look at your overall investment plan. Hopefully, by then, you've been able to put together all the pieces of the puzzle and can see if the whole thing holds up and is worth pursuing. In case it isn't, you can take solace in the fact that it's easier drawing up a new plan than recouping thousands of dollars worth of losses in the stock market.
9. Reach for the stars. After you've made the decision to put money into such and such investment, it's time to stop over-analyzing and start taking action. As it turns out, even if you picked the absolute worse investment, you won't have lost everything you own because you did your homework and set limits to your losses. Your game plan, as long as it is sound, will produce solid returns in the long run if you stick to it.
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.
1. Set your goal. Take your personal factors into consideration to come up with the type of portfolio that best suits you. Then analyze every potential investment by thinking about what you want out of it and whether or not it fits into your overall investment plan. Just like a sports coach, have your X's and O's ready, don't react to the market. This will save you a lot of headaches and money.
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. Assess possible risks. Your ability to assess the risks your investment carries will be critical to your success. The key here is to look at them realistically, not with wishful thinking. Your management plan must be as effective and practical as possible in order to minimize your losses and in turn maximize your profits. This step is to be completed BEFORE evaluating profit potential, to avoid you getting so excited about your potential profits that you fail to properly evaluate the risk you'll be taking.
4. Think about profit potential. One of the hardest parts about investing is knowing when to cash out once you're riding a winner. You should have a set threshold where you sell off enough to at least recoup your initial investment, and then ride the profits as long as you can. Know when and how to get out.
5. Keep an eye out for comparable opportunities. Do a little more research. Check to see if there are other investments that have fewer risks, a better profit potential, or if there are is another strategy that will make your life easier (or hopefully a little richer at the end of the day).
6. Evaluate the hurdles. This falls right in line with having an initial strategy that you follow from the beginning. Every time you consider an investment, it will bring about its very own unique characteristics, and its risks. If you have already gone through the process of anticipating those risks, you stand a much better chance of minimizing the risk of losing money.
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. Make the right choice. Investing is time-consuming, so before you jump in, take one good look at your overall investment plan. Hopefully, by then, you've been able to put together all the pieces of the puzzle and can see if the whole thing holds up and is worth pursuing. In case it isn't, you can take solace in the fact that it's easier drawing up a new plan than recouping thousands of dollars worth of losses in the stock market.
9. Reach for the stars. After you've made the decision to put money into such and such investment, it's time to stop over-analyzing and start taking action. As it turns out, even if you picked the absolute worse investment, you won't have lost everything you own because you did your homework and set limits to your losses. Your game plan, as long as it is sound, will produce solid returns in the long run if you stick to it.
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.
About the Author:
Before you invest, make sure you read our extensive stock market success report. You can also find more financial tips on our personal finance blog, Money Galaxy.
posted by Credit Counseling at
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