Everyone would like to be a better investor. People get in a twist trying one method then another, only to abandon it for the next new thing. There’s an easier way – a few simple suggestions.
1. Watch your stocks, not the market
Just because the market is frothy doesn’t mean your stock is; just because it’s sinking doesn’t make your stock a bargain. Look at your company and how it’s priced before deciding to sell. Panic-selling on rising or falling prices is equally unwise.
2. Spend less time reading market opinion
Spending too much time attending to your investments can send your portfolio downhill. Experts sound persuasive but can panic you into selling too soon or buying what you shouldn’t. If you must read, read the company’s annual and quarterly reports and skip most of the opinions.
3. Get the buy right
Buy solid dividend-paying companies when they’re on sale and hold them until there’s a major change in their story – sometimes for a lifetime. Buy-and-hold proves itself again and again.
4. Ignore market noise
In the short term the market makes little sense and moves for a million silly reasons. In the longer term, good companies reward their shareholders and their prices reflect it.
5. Diversify intelligently
Buy stocks when they’re on sale, not just to diversify. Over time, taking advantage of economic cycles, you’ll still end up diversified – but with stocks bought at bargain prices.
6. Balance profits and losses
When you need to raise cash, balance winners against losers – it minimises tax exposure, cleans the junk from your portfolio and lets you take some profits.
7. Don’t confuse a great company with a great stock
A profitable, well-run company isn’t automatically a good buy if its share price has been bid up to unsustainable levels. If you like it, wait for a temporary drop.
8. Take a beginning accounting class
Learning to read a profit-and-loss statement and the fundamentals of business accounting gives you a huge advantage in judging whether a company is financially healthy. Understand how markets and valuations work and you can stay calm while others panic.
General advice warning: The advice provided is general advice only. In preparing it we did not take into account your investment objectives, financial situation or particular needs. Before acting on this advice, consider how appropriate it is to your needs and objectives, and consider the relevant Product Disclosure Statement before making any decision relating to a financial product.