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How to Become a Smart and Successful Investor

By Edited Sep 17, 2015 0 0

Investing is the answer to building wealth, but the act of allocating money or capital to this kind of endeavor is not enough. You have to invest wisely if you expect to receive additional income or profit.

A successful investor is a person who is truly interested to know about the different aspects of investing including the amount of time he or she puts into the study of any company and is not afraid to take risks that will come along the way. Investing is not an easy way of making money because one needs to do his or her own research before entering into this kind of field. 

You could profit so much in an instant but may also risk a lot of your investments in a flash that is why you need to update yourself and be knowledgeable enough in this kind of business that you're in. Those who had succeeded in making a lot of profits as investors could have gained their knowledge based from the wisdom used by known and successful investors or acquired through their own experience from independent study.

If you are an investor who started with a small amount of money as your capital and rolled it to buy more shares of stocks and has gained profit from them then you can consider yourself a successful investor. May the instructions below provide you additional knowledge when it comes to online stock investing.

Difficulty:
 
Moderately Challenging

Instructions

    • 1

      Start your independent research before any trade that you'll undergo because this is vital if you want to become a successful investor. By doing your own independent study through research, you can follow a certain procedure that will guide you toward your investment goals. 

      You can read some books, ebooks or attend seminars about investing so that you shall know how to evaluate exactly the real value of a certain company with its stocks and understand the current market conditions and learn economic investment trends. Knowledge can provide you more confidence when it comes to buying and selling your shares of stocks.

    • 2

      Arranged and construct a systematized investment plan. You need to put together all your plans so that you can start building your financial statements. You need to follow your business plan and adjust it whenever there are things that needs to be adjusted. You need to have a good draft first and try to envision your statement of cash flow for at least two years based on your income statement, balance sheet or debt (if applicable).

      A good marketing strategy is needed in this kind of business. You also need to use know about the legal and administrative requirements including registration, licensing and among other things if you want your investment plan to expand. Take note that everything will start by creating a good investment plan because it will provide the reason why you're interested in investing. It will also give you the steps on how it will be accomplished. 

      Make sure that your investment plan is realistic and attainable in meeting your purpose of an action. Consider adding a simplified trading plan so that you will know what to do in case if the share price goes up or down. This is helpful so that you'll stay calm whenever there is a sudden change in market fluctuations.

    • 3

      Apply what you had learned from your independent research and use the investment plan that you created. Take note that it's not fast to acquire good investing skills. You need to train yourself first. Experience is really important that is why some people will try to invest little by little as a start and this could be fine while others do it by using fake money through a simulation mode that some financial websites offer to new investors.

    • 4

      Watch closely general market conditions. For example, you need to be ready and prepared in selling or buying the shares of stocks that you want in advance. Place your money only to financially secured companies to avoid too much risks. 

      Successful investing requires you to stay on track by keeping in touch with your investment portfolio by making sure it's still on target to meet your aspirations through the unavoidable changes in the markets including your life's situation as well.

    • 5

      Diversify among other stocks in different sectors so that you'll not only invest all your allocated money in one stock. Diversification is an important factor if you want to reach your investment goals. 

      All stocks are volatile that's why you need to concentrate on some industry sectors that you think may do good in the long run. Provide some good reasons why you want to buy a particular share or shares of the stock that you have in mind.

    • 6

      Avoid allowing your emotions to dominate and control over the realistic and reasonable methods that you already had organized and established. Keep your mind clear and focused. 

      You need to stay calm and be updated with your investment plans and actions based on certain facts. You also need to understand the risks involved by looking at your "risk assessment plan" and check the probability of gaining or loosing. 

      Always try to predict your possible risks first prior to the possibility of making a profit. Watch and study the financial quarterly reports and economic investment trends before making any decision so that you'll avoid rushing when you buy or sell shares of stocks or bonds in the market.

    • 7

      Use your rational insight or intuition when you start investing. A good insight or intuition may come from a study taken, experience and good intellectual analysis based on facts. When you start to profit from trading your stocks, be careful not to overspend because you may lose your profit in an instant. 

      It's normal to lose if you start investing and it doesn't mean that you're not a smart investor. Even some of the most profitable investors had experienced some losses before they were able to succeed with their business endeavors. 

      Have faith in your investment strategy and stick to it or if you think that you have a better idea then try to reconstruct business strategy. Avoid hoping that a particular stock will bounce back up after a huge setback because you could end up losing more than 40%-60% of your invested fund.

      Always check your investment portfolio and decide to cut off your losses at a certain percentage probably starting from 8%-10%. Study and conclude what was the main cause of your losses so that you'll be cautious next time and serve it as your helpful example. Just like you, professional traders are also continuously learning new methods on how to invest in order to maximize their profits. 

      It is important that you are good in noting your plan of action as well as keeping records of your trades. Constantly seek information about trading tips and serve them only as your guide because in the end, you'll still have the final say based on your own trading analysis. Do your homework by researching about the stocks that you're going to buy because stock trading is a challenging business that needs patience, good judgment, confidence, strategy and discipline.

    • 8

      Continue in self-educating yourself so that you can upgrade your investment skills. Attend conferences and conventions or participate in group discussions, meetings or workshops about investing. Learn how to interpret the fundamental and technical analysis indicators in the market. 

      There are also investment software tools to help you analyze your return or risk ratio. Recognize and follow market timing for a particular stock. You can also trade and invest by using modern investment software tools to help lessen the way you spend long hours, for example, in scanning from hundreds of stock charts to choose from.

      Modern software tools could provide assistance when you're investing and trading. You may purchase a software that may help you in choosing a better fundamental, technical, and timing analysis together as a whole. Some computer programs can now combine results of technical, fundamental and timing analysis into a combined rating using a special algorithm, watch hundreds of stocks, calculate cash reserve depending on the market condition, forecast stock price and among other things. 

      There are many investment software tools but you need to select the best that will suit your needs if you think you'll need one. Check first their demo versions, some blogs about the product and carefully read software descriptions before considering buying any of them.



Tips & Warnings

  • Learn about fundamental analysis which will let you predict a long-term stock performance. It will usually depend on some important factors like market stock value in comparison to earning, company profitability and its growth, book value, liquidity, sales or among other things. 

    Stock prices could also rely upon popular investment analyst's opinions, news and research groups. There are more factors that could influence stock performance.

  • Restructure your investment portfolio and purchase new stocks. Don't be so hard on yourself if ever you'll have a few losses, take it at first and be confident to see returns later on as time passes. 

    If you can find prices of stocks that are low coming from a reliable company then try to consider buying them because these stocks will highly go up since you already bought it at a cheaper price.

  • If you have never invested in stocks before, you can easily open an online account from a well-established stock investing brokerage. Buying and selling stocks has become so simple these days with the use of online stock investing. 

    The minimum amount to invest in one stock if you're still new could probably start from $500-$2,000. Consider the commission fees involved if you start to buy or sell your stocks because a very small amount may not be logical during the trade.

  • Many investors want to trade through a long-term period probably from three to ten or more years. Some will choose the mid-term period like five months up to a year or two while others may just select the short-term possibly each week or even just a day. 

    Take note that if you are new to investing, you need to stay with your investment plan. For example, if you had set to invest 30% of your money in the stock market then try to stick with it.

  • Not everyone will become a successful investor. Most investment losses occur due to lack of skills and knowledge, inability to wait, over-confidence, overwhelming and uncontrollable desire for more profits, or apprehension. 

    A good and wise investor knows that there is a better way to have a right proportion between money and time spent to increase profits.

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