Tips to make money in the stock market (& Not to lose)
AuthorHiggo van Biljon
I've learned many lessons over the past few years. Here is my 12 Main Tips that can help you!
- Make a plan & stick to it
The individual investor should act consistently as an investor and not as a speculator.
Everyone is unique.
Everyone should have their own goals & plans.
The stock market provides us with enough history, lessons, opportunities etc to be able to make really solid plans.
The thing is, we need to be able to stick to that plan!
Failing to plan is planning to fail.
- A plan should include:
What is my risk tolerance?
How many companies do I want to own?
Which types of companies will I own?
What is my exit plan?
What % of my savings will I invest each month
What are my key metrics when researching a company?
- Ability to execute on plans
- Vision of company
- Locations of operations
2. Stay in control of your emotions
The most important quality for an investor is temperament, not intellect.
Being able to stay in control of emotions is extremely difficult, for everyone. But its what can separate you from being a good investor to being a great investor.
Heres a formula:
- Not staying in Control of your emotions:
Decreasing stock prices = More fear = Panic sell = Losses = Regret
Buy high, sell low
- Staying in control of your emotions = Know your plan = Think long term = Long term positive returns.
If you know that you struggle with financial emotions, why not just buy an ETF and forget about it?
I will do a post on ETFs soon.
3. Look at history
Be fearful when other are greedy, be greedy when others are fearful.- Warren Buffet
The four most dangerous words in investing are: This time its different- Sir John Templeton
If you look at the All-time stock market chart, you can clearly see that it goes up.
The stock market has been through wars, recessions, bubble pops, Pandemics etc.
Still it always go up over the long term.
Corrections & bear markets is what presents investors with massive opportunities.
Its all part of it.
But note, not all companies always go up
That is why diversification is key, and why finding high quality companies is essential. (Or ETFs)
4. Learn from others
Everyone makes mistakes.
The more we learn from the mistakes of others, the less mistakes you will make.
The stock market will always find a way to humble us. Especially when we become greedy.
When you made a mistake, learn from it.
When you have seen someone else make a mistake, also learn from it.
5. Never invest money you cant afford to lose
If you have trouble imagining a 20% loss in the stock market, you shouldnt be in stocks.
6. Look at the company, not the share price
Jeff Bezos: I never spend any time thinking about the daily stock price, I dont
The share price always catch up to the companys fundamentals. Look at the company, not the share price.
Diversification is important.
- Geography (JSE, US, ASX etc)
- Companies within a industry (Eg, Cloud - Microsoft, Cloudflare, Amazon (AWS), Alphabet (Google Cloud)
- Industries (Cloud, hardware, retail, food)
8. Know your timeframe
This is simple, are you a long tern investor or a short tern trader?
If its long term, what is your time frame?
6 months is not long term.
If you are long term, know what it takes.
It takes being in control of your emotions through volatility on the upside & downside.
9. Dont panic sell or panic buy
Time is your friend impulse is your enemy. Take advantage of compound interest. And dont be captivated by the siren song of the market.
Panic buying or selling, can make you buy high and sell low.
Panic sell= Fear & FUD.
Panic buy= FOMO
If you feel you missed an opportunity, dont rush or make impulsive decisions. There will always be another opportunity.
10. Dollar cost average
Personally, If I am convinced about a company (long term), then I will buy continuously, especially as it drops.
Because then I can get it cheaper and lower my average purchase price.
Volatility gives opportunity.
NOTE: Not every falling knife is one you want to catch. Buy low, sell lower
I only ever buy falling knives if I truly believe in the long-term investment thesis for the specific company.
Never invest money that you cant afford to lose.
Low can always go low.
Cheap can always go cheaper.
11. Theres power in compound interest.
Compound interest is the eighth wonder of the world.
To see the true miracles of compund interest, you need to be able to invest over a long period of time.
12. You can do this!
You dont need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.- Warren Buffet
There will always be more tips & lessons.
Never stop trying.
Never stop learning.
You got this!