How to Invest in Stock
Most people get the wrong idea about how to invest in stock. It has nothing to do with choosing the right stock.
It’s all about discipline and management. Sound scary? Like you need a PhD? The discipline part you will have to look after, but it gets lots easier once you see the results. The management bit is really simple; your broker would lose his job if you knew how simple!
If we asked what causes more individual investment losses for the average brokerage or even mutual fund client than anything else, most likely answers would include:
- Bear markets
- Poor investment choices;
- Lack of investment knowledge and experience;
- Buying too late in the investment cycle;
- Panic selling at market bottoms;
- Poor advice;
- Broker or mutual fund fees; and
- Companies that go bust.
The honest might blame themselves; others might blame their advisers. The truth is that while all have an influence, none prevent you from being wealthy as an investor. They are largely excuses. Every item on this list can easily be overcome with some very simple disciplined investing strategies.
The major culprit
Lack of investment discipline is the major culprit. It’s no secret. Any investment expert will tell you that you need discipline, but if the answer to successful investing is so well-known why are there so many losers? Why is investment discipline so difficult to maintain?
After all, discipline is drilled into most of us from an early age.
It seems that investing and discipline must be mutually exclusive when so many people have little difficulty in being disciplined about other things. Take sport or games, for instance. Most of us know that winning by cheating is far less satisfying than winning according to the rules. Deep down inside you know you won because of cunning, not because you were the best.
The same is true of investing – yet so many think their way should be better.
The number of people who lose money investing in perfectly good companies should tell you their way is usually not better. Some think there must to a special brand of magic to knowing how to invest in stock. Many simply never find out how to be successful.
Why is it so hard?
I puzzled over the reason and came up with at least one clear answer: All sports and games have strict rules for us to follow. Can you imagine how chaotic soccer would be without rules? Want to play with an unlimited number of players? Capture the opposing goalie and tie him up? Punch anyone who got in the way? It would be a farce.
The strategies we teach work and work well if all are followed exactly. In sport, we cannot choose to observe some rules while ignoring others and the same is true of how to invest in stock.
Having success strategies – call them rules if you like – gives us a base for disciplined investing. Understanding why those strategies work gives us the discipline to follow them faithfully. Once we have the rules, we can be as disciplined as any sportsperson.
Successful investing is simple, logical
Hard as it may be to believe, the rules for how to invest in stock are simple and logical. Stocks, as many believe especially after the sort of downturn we endured in recent years, are not an instrument of the devil. The stock market is not a gambling arena filled with crazed speculators, though there are plenty of those. It is not a game manipulated by rich and heartless Wall Street dark suits bent on fleecing the little guy.
A proper set of rules will, at a minimum:
- Give you the ability to act decisively and correctly under all market or economic conditions. This means no more guesses or crossing of fingers, no more fear no matter what happens;
- Allow you to avoid disastrous losses, even if you occasionally invest in a company that goes broke;
- Provide easy and foolproof risk management;
- Make it possible for you to stand on your own two feet without the need to place your financial future in someone else’s hands; and
- Give you a clear understanding of the basics of investment discipline and creating wealth and allow you to teach your kids and grandkids the clear rules for saving and retiring wealthy.
Say goodbye to stress
Dreams? Not at all. Wealthy Investor Weekly, our weekly online report that tells you when to buy and when to sell, lays it all out for you. All you need to do is follow it faithfully and you will know better than most how to invest in stocks and make good money.
With proper understanding, you will not be confused by conflicting news reports or stampeded into taking inappropriate action. If you are an investor now, you most likely went through a great deal of stress as your stocks dropped dramatically.
All that stress would miraculously disappear if you used strategies that you knew absolutely would work for you; it would provide the faith you need to weather the storms and practice investment discipline.
Come through stronger than ever
Incredible though it may sound, you would gain a measure of satisfaction from falling markets knowing you would come through them stronger than ever.
Examine the annotated charts in How to Become a Wealthy Investor and on this website – spend some time with them – and you will know how to invest in stock with more success than you dreamed. You may find the key to recovering dashed retirement hopes.
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