Investing Rules

This first rule is pretty straight forward and it comes for the great mind of "The Oracle of Omaha" himself - Warren Buffet. Thin about it, it is timeless advice, why would you lose money when the point of investing is to grow it? What "never lose money" actually means is to not be blind-sided by what your investment could potentially yield, without evaluating the the risk as well. If the rewards do not outweigh the risk the investment may not be worth it.

Big things start from small beginnings... When it comes to stock investing the trick is to start small and take your time testing the waters. Start by investing a small fraction of your savings or monthly income ($1, $50, $100, $1,000 - it really does not matter) to investing. Before doing so, take the time to learn about the companies you want to invest in. Starting small until you are good enough at identifying the best companies to buy stock in will ultimately help you develop an excellent investing strategy that ensures you will make it BIG in the stock market.

Treat your stock as your business; your stock is not a gamble, you actually own pieces of a real business. Stocks give you a fraction of ownership of a particular business, so you need to think like a part owner of the business that you are investing in. To think like an owner, analyze the business' fundamentals, its valuation, and get a professional opinion of how the business will perform in the future. Make sure the business has an excellent management team that has the shareholder's interest at heart, and that has positioned the business in an excellent financial and competitive position.

You are investing in a business; therefore, you must understand how that business makes money, its strengths, and the current and future risks the business is facing. If you do not understand this, let the investment go! Apply this theory to all investments...

You can not predict when a stock will hit its peak or its bottom - refrain from trying to time when the market will value a stock correctly. No one has done it yet!

After developing an investment strategy and identifying a stock worth purchasing - stick with it! After deciding on a target price and stop loss - stick with it! After deciding on how much to invest and at what investment pace - stick with it!

We know the stock market is volatile, which makes it hard to stick to your plan. Your emotions will often boil because of the money you have on the line and the uncertainty that comes with it. Don't sweat it - stay calm and follow your plan!

The stock market is ALWAYS volatile, which means you are always in danger of losing money. That's why you only need to risk losing the extra cash you have and not the cash you need for everyday survival. The significance of budgeting and planning your investment can not be overstated.

The last thing you want to do is invest in the the stock market and just let it be. You must track your investment to stay informed on the domestic and global changes in the market that could mean trouble for your profits. If you can't track your investments yourself hire a professional to manage your portfolio - you can provide the specifications on how you want this done.

Do not put all your eggs in one basket. Diversifying your portfolio minimizes the risk of losing your money. Invest in a variety of assets and instruments to accomplish this.

Buy stocks and hold them until you have hit your "target profit" or "target period" - it is the best way to make money in the stock market.

Most investors stop paying attention to the market and sell their investments when the market takes a nose dive. DO NOT FOLLOW SUIT - that's when the "Black Friday" bargains are out there in droves. Can you believe that the stock market is literally the only market that when things are on sale people are too afraid to buy.

"Be fearful when others are greedy and greedy when others are fearful!"

It is easy to develop the best-case scenario mindset; however, you need to guide your decisions based on realistic expectations of a stock's returns - not the excellent results you are hoping for!

Locking in your profit enables you to earn regular income. Because the stock market is always moving up and down it makes sense to have some money locked in to actively buy with and to identify and realize profit from time to time.

If you have stock that can be more profitable leave it alone. On the other side of the coin, if you have stock that is going wrong why let it get worse? It is harder to recover losses than you think.

Learn continuously from your mistakes - you must keep a record of your losses and profits to do this efficiently so that you can avoid future mistakes. Stay focused, keep your feet on the ground, and do not let things go to your head.