This Key investing success lesson opens The Money Making Investing Success course of practical lessons covering some knowledge and skills used by successful investors.
What you learn:
This Key investing success lesson opens the Choices To Make Money Work course of practical decisions and skills of knowledge, successful investors. This level 200 course builds on the level 100 courses on investor foundation knowledge. This course outline and lesson overviews tell you what to expect from this course with a link to each lesson.
FAQs investors asked about the key investing success choices
These questions and answers about the key investing choices have overlapping answers which help investors understand how stock markets, investing, and money-making interrelates.
What are the investment choices?
Stocks, bonds, and cash are the big three, and the most popular include mutual funds and exchange-traded funds (ETFs).
Real estate, precious metals, other commodities, and private equity are also available, and options offer even more possibilities. But it takes research to select the best investments for your circumstances.
By researching the many choices, differences, advantages, and disadvantages, each investor can build a solid foundation of knowledge. That can set them up to make well-researched decisions for a lifetime of good investment returns.
Combining knowledge and good decisions separates exceptional investors from others to ensure they make the best choice for their circumstances.
What are the keys to investment success?
Investing in knowledge is crucial. Educate yourself on markets, investments, and the behavior of successful investors. Cultivate your investor mind, make the lifestyle choices of an investor, and make informed decisions to ensure financial security and success.
Reinvesting returns compounds your financial growth as you continue investing with a long-term view.
Understanding and managing your risk tolerance is critical. And using smart diversification tailors your investment decisions to your circumstances.
Make monitoring and reviewing your investments a part of your investor lifestyle. Stay current, continue growing your knowledge, and take necessary action to ensure financial security.
When should an investor sell?
Selling is for traders. A real investor in productive assets never wants to sell but acts to let profits grow. Selling early limits gains. That is why patient investors are the rich ones. They build wealth with more time in the market - by staying invested.
Early selling is a form of investor impatience that limits wealth-building opportunities. Instead, wise investors continue to ride winners that keep paying.
For any stocks that don't pay, they sell as soon as they can. That way, they hold only winners, keep collecting dividends, and patiently, steadily get richer.
While investments keep paying, they do not act in anticipation or on rumors, opinions, or fear. They wait and deal with facts.
At what percent loss should I sell?
Traders quickly exit bad trades, but long-term investors holding quality dividend-payers ride out turbulence as these stocks keep paying and always recover.
Most successful traders use two loss-limiting strategies to protect capital: a trade loss limit and a portfolio loss limit. However, wise traders sell when they realize any trade is not working, irrespective of any loss limit.
To backstop their position, the most successful traders set a loss limit from 4% to 8%, with 6% as a typical pick. They sell without hesitation, question, or exception whenever the limit gets hit.
Traders also set portfolio loss limits. If a portfolio limit set at 6% gets hit in any month, they stop trading until the next month.
Should investors sell to take profits?
The answer depends on your investment goals.
To build wealth, informed investors sell losers or poor performers and patiently ride productive winners. It is only impatient investors or traders who sell early.
If a stock is producing, keep it. Long-term investors collecting income and capital gains from productive assets are always the winners.
Except in down markets, productive asset owners steadily increase their wealth. And even severely down markets are soon history.
To build wealth, invest in productive assets. Long-term that pays better than trading and is easy to learn and do. Trading well takes knowledge, time, and skill. It works best in markets when they strongly move up but less well in sideways markets, and except for short-sellers, little in down markets.
What investment advice has Warren Buffett shared?
Warren Buffett shares wisdom in the annual Berkshire Hathaway shareholder letters, including these gems:
1. Investing is simple but not easy; it takes knowledge, discipline, and patience,
2. Buying stocks and investing is a business,
3. Shareholders should think like business owners,
4. Limit diversification to keep investment power concentrated,
5. Do the research homework before investing,
6. Invest for the long-term, do not trade in and out,
7. Economic and business fundamentals matter, not the stock market,
8. Investing psychology affects markets; use facts to manage emotions,
9. Growth and bottom lines matter, not forecasts,
10. Careful research finds investment opportunities.
Consider the advice offered by Warren Buffett
Investing, the simple hard business
Over many years Warren Buffett has shared his thinking in the Berkshire Hathaway shareholder letters. The letters are an excellent collection of business and investment advice. In them, an often repeated point, investing is simple but not easy. Investing well takes the knowledge, discipline, and patience. As well he encourages making the effort needed to do the necessary research. To buy productive assets well also means knowing their value. In addition, investors must know that there is a positive outlook for their value to grow. He regularly reminds us that patience is Included with the long-term perspective.
The business of owning companies to make money
Warren Buffett views buying stocks as a business. He sees shareholders as part owners of each business or share bought. We too can adopt the approach Warren Buffett when we buy stock. Like him, as stock market investors we can also see ourselves in the business of making money work for us.
Diversification
Diversification is important for investment success. But he has a diversification caution. Too much diversification can be a bad thing. Warren Buffett urges investors to intelligently diversify to spread risk. But not to diversify to the point of diluting the ability of a winning investment to build wealth. We must hold positions that can significantly increase our wealth. To do that, we keep out investments concentrated in a relatively small number of companies. That makes our portfolio a better wealth builder for us.
Research
Warren Buffett is a great believer in research. And he especially believes in doing the investment homework. That is necessary to finding good prospective investments. And that investor research means digging into each business. That lets us develop an understanding of the company. It also makes us knowledgeable about the industry, and opportunities for growth. And that research must happen before we invest. To invest like Warren Buffett we only buy good companies with excellent long-term prospects.
Long term view
As for the time frame, Warren Buffett supports the idea of investing forever. He always recommends against trading in and out of a stock. One result of that is ignoring the trading signs and signals. That keeps us focused on business fundamentals and bottom-line growth. By having a focus on the economics of the company, and not the market, we build value. And that business opportunity focus keeps us away from stock market noise. In fact, Warren Buffett is well know for paying little attention to the stock market. He does not care what stock market traders think or may be doing. However, that does not mean never trading. As well, if things change, we quickly sell a company with poor or limited prospects.
Patient calm psychology
There is no sure thing. Especially in the stock market. But a patient calm approach keeps the positive probabilities as a most likely outcome. Most notably when long-term investing. Warren Buffett is also aware of and understands investing psychology. The psychological mindset of successful investors manages emotions. Mature successful investors keep their focus on economic issues and making rational decisions supported by facts. That approach keeps emotional thinking and decisions out of the investment mix.
Noise control
Warren Buffett is also well known for ignoring stock market forecasts. The market has and always will continue to regularly develop and progress. By far, most of the progress is positive. Although, doomsayers are many, they are seldom right. So we do the sensible thing and ignore them. But we are not eternally optimistic. Instead, wise investors consider both optimistic and pessimistic outlooks as opinions. They add no value. Rather, real growth and bottom lines do deliver value for investors. We stick to the facts.
Digging for treasure
Through careful research, Warren Buffett digs through the market and economy to find excellent investment opportunities. He suggests we also carefully research. As well he advising patient waiting to find the best investment opportunities. With careful research done, he acts infrequently and deliberately when opportunities are found. But when opportunities do present themselves, he moves fast.
Loss Limit Considerations for Stock Market Traders
Be mindful that long-term investors are in and stay in quality productive holdings. However, traders and speculators are playing the market. When playing the market, setting stop losses can help protect capital.
Setting a trading limit at a percent loss may seem straightforward, but it gets tricky depending on your investment goals, risk tolerance, and the fundamentals of each company owned. When setting loss limits, traders have these considerations:
1. Investment Thesis
Has the reason you invested in the stock changed, or have the company's fundamentals or prospects changed? A temporary downturn might not warrant selling.
2. Stop-Loss Orders
Although stop-loss orders can limit losses, if jumped, they can be missed or triggered by short-term market fluctuations or the manipulations of high-frequency traders, making them imperfect protection.
3. Portfolio Diversification
Diversification helps mitigate the role and risk of loss of each stock in your portfolio to minimize the overall impact.
4. Risk Tolerance
What percent loss of an individual stock or portfolio makes you uncomfortable or significantly impacts your financial situation?
5. Technical Analysis
Some traders use technical analysis support levels, trend reversals, or other bearish signals as selling triggers if the stock hits those marks.
6. Emotional Considerations
Psychological factors, particularly fear, panic, or greed, are powerful emotional triggers traders must manage to avoid irrational decisions.
7. Long-Term vs. Short-Term Perspective
Building a portfolio of assets muddled between long-term investments and short-term trades will undoubtedly lose money. Pick your lane.
Some experienced traders set a hard percentage loss limit and sell without exception if it is hit. Ultimately, there's no one-size-fits-all answer to this question. It is essential to have a clear investment strategy and regularly reassess your holdings based on your goals and market conditions.
If you need clarification, consult a trader with a successful trading record who can provide personalized guidance tailored to your situation. Just make sure they know and support what you want to achieve. Trading (short-term market plays) and investing (long-term productive quality stock holds) don't profitably mix well in one portfolio.
White Top Investor Course 210,
Key investing success lessons
The big picture of topics covered:
Money Making Investing Success, Course #210 - lesson links:
1.
Key investing success lessons Lesson 1
This is lesson 1, Key investing success lesson that begins The Money Making Investing Success course. Each practical lesson in this course teaches the knowledge and skills used by successful investors. The introduction outlines the material and links to each lesson.
2.
Top 4 ways to find money to invest Lesson 2
Top 4 ways to find money to invest, cut debt, job grants, lower costs and saving is the superior investor combination that funds wealth building portfolios.
3.
Time to invest or time for an advisor Lesson 3
Time to invest or time for an advisor? Investing to build financial security and future comfort are worth your time - no time to invest? - use an advisor!
4.
Low costs double returns as ETFs beat mutual funds Lesson 4
Choose low costs over low returns for greater profits to investors managing costs well. Low costs can double returns for ETF investors over mutual fund returns!
5.
4 Successful investor traits Lesson 5
4 successful traits of superior investors, knowledge, focused, decisive and ready to act. Some manage their own portfolio, others use professional advisors.
6.
Small investors have advantages Lesson 6
Warren Buffett pointed out that small investors have advantages including return, size, growth, liquidity, pecking order and new listing advantages over huge funds.
7.
Avoid 6 investing sins Lesson 7
Avoid 6 investing sins to eliminate errors that hurt investors and fail to take advantage of active investing opportunities. Those errors include using only news, no research, loser holdings, turnarounds, averaging down, not learning or paying attention.
8.
Investment impatience destroys wealth Lesson 8
Investment impatience destroys wealth in every market. Patient investors build wealth riding dividend stocks. You can also avoid selling early by riding winners that pay dividends to grow wealth.
9.
3 Yeses or no investment Lesson 9
3 Yeses or no investment! Superior investors need a yes from the economy as well as the market and company or we say no and keep the money in our pockets.
10.
Investing can be fun, interesting and slow Lesson 10
Learning investing can be fun, interesting and slow as a lifelong journey that delivers years of satisfying and substantial results. Great investments grow, pay and deliver rewarding results over many years on less than an hour a day to research and monitor your portfolio.
11.
Warren Buffett explains gold Lesson 11
Warren Buffett explains the investment value of gold. Gold is not productive. Investors buy productive assets to build wealth producing portfolios essential for investing success.
12.
Smart investors use smart diversification Lesson 12
Investors can lower risk and increase exposure with smart diversification. By making smart diversification fit personal circumstances, investors meet needs, goals and exposure to greater market opportunity at low risk.
13.
How investors buy dips Lesson 13
How investors buy dips uses checkups, winners on sale and bargain prices to make money during stock market corrections. Savvy investors buy winners in dips adding more profit makers to their portfolios.
Why this lesson matters
This lesson gives you a preview outline of the material covered by each lesson so you can decide if you want to take the course.
Other lessons related to:
Key investing success lessons
Questions investors ask and answers linked to related lessons FAQ about investment choices
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Choices to make money work,
lesson links:
Overview of investment choices Lesson 290.01
Key investing success choices Lesson 290.02
Join exceptional wealth builders Lesson 290.03
Investing time or adviser time? Lesson 290.04
Media exposes advisor incompetence Lesson 290.05
Small investors have advantages Lesson 290.06
5 Secrets of superior investors Lesson 290.07
Avoid 6 investing sins Lesson 290.08
Investment impatience destroys wealth Lesson 290.09
3 Yeses or no investment Lesson 290.10
Investing can be fun, interesting and slow Lesson 290.11
Warren Buffett explains gold Lesson 290.12
Stock trading halts explained Lesson 290.13
FAQ about money making investment choices Lesson 290.14
FAQ about financial and investment advisors Lesson 290.15
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