Investing in the stock market is for the average, every day person… you just have to know the five golden rules to help you start trading successfully.
Most people understand that learning how to invest is a primary way out of living from pay check to pay check, but unfortunately most are unsure of where to start and therefore stay stuck watching the price of shares rather than investing in them.
It’s a common thought that trading stocks and shares are reserved only for the rich; all high risk and almost 100% chance of losing everything, especially if you’re a newbie. The truth is that’s just not so, you simply have to start somewhere with a good basic foundation.
From across the pond in England and here to guide us is Clem Chambers, Forbes columnist and author of the Amazon No.1 investing bestseller “101 Ways to Pick Stock Market Winners”. The following is Clem’s five rules to stock market investing that will start you off on the path to success.
Rule 1 – Build a stock portfolio of 30 shares.
Take no notice of the people that say put all your eggs in one basket. A portfolio gives you a certainty that bad luck won’t hurt you and that your choices on average will deliver the return your share picking deserves. This portfolio return over the years will outperform anything a bank will offer you on deposit and will compound.
A diversified portfolio will mean you will miss out on good luck, but investing isn’t about good luck. Bad luck and good luck cancel out over time but if you have too much of your money in too few shares then bad luck can knock you out of the game.
Rule 2 – Until you own at least 30 different shares never buy more than £1000’s worth of any share.
Risking too much on any stock investment is a recipe for disaster, even for the sophisticated stock market investor. Keeping your individual share investments small keeps your capital pot safe and lowers the stress that can make investing unpleasant. Once you have 30 stocks you can grow the scale of each investment, but until that day stay small.
Rule 3 – Get online and get the stock picking tools of modern investing.
A free ADVFN account (www.advfn.com) provides investors with free stock market tools that a few years ago would not even be available to the professional fund manager;
o Real time share prices.
o Fundamental information.
o Portfolio tracking.
o Many more free services!
These free services let you make highly informed financial decisions on what shares to buy and when to sell them. Researching your stock market investments might seem like work. That is because stock market investing is work.
Sadly investing is not a short cut to wealth, you need to treat it like any other way of making money -with focus and determination. Hopefully you will find it a lot of fun and more like a pastime than a chore.
Rule 4 – Always pick stocks using charts.
There will always be new ways to make money using charts and over time they will stop working. This is the way it is with markets.
To be successful you need to be constantly on the lookout for new methods; old ones are always eaten away by the efficient market. To make gold you must slowly destroy your philosopher’s stone and then make another.
Rule 5 – Invest in shares for the long-term.
Buy shares you think you will hold for three or more years. Do not make your broker rich and yourself poor by trying to trade. When the world’s most successful investor, Warren Buffett, claims sloth as his most profitable investing trait you should take note. Slow and steady wins the stock market investing race. Value investing is a great skill to learn.
Put your investing money in a SIPP or ISA and let the profits roll up tax free. While interest from the bank is taxed, using these tools can protect your stock market profits and dividends from tax; one more reason to let the long-term take hold.
Just remember, by the time you can afford a Ferrari from stock investing you will be too old to want one. You think that’s bad? Perhaps you should wonder if you have any other way to get Ferrari rich at all, before you worry how long it will take.
If you can see stock market investing as a part time job from now until retirement you will do very well indeed from it; it is the short-term forex and share traders that get burnt.
Thanks to Clem for sharing those five golden rules with us and if you want to hear more from Clem you can grab his ’101 Ways to Pick Stock Market Winners’ available from Amazon.
Above all always remember achieving success in our life starts in our minds. The proper mindset is the base ingredient to succeeding at anything, whether it be financial or otherwise. Put as much or even more time and effort into how you think, speak and act as these actions form your essence and yield the like results. Always be on top of your mindset and your personal vision statement. To Your Success!