Everyone wants to be successful in investing and growing their wealth.
Here are 5 overlooked tips for successful long-term investing!
This article was submitted by a Guest Contributor. The opinions expressed in this publication are those of the Guest Contributor.
1. Not adjusting strategies for short and long-term investing
We often talk about long-term investing – but what is long-term to you?
Most of us have short-term and long-term goals, and this requires a different strategy to achieve.
When you allocate money to investing, what goal are you trying to achieve?
Have different strategies for your short-term and long-term investing goals – your risk tolerance for each will be different.
For instance,
- 3 year short term investing goal to build up funds for a mortgage down payment
- 10 year long term investing goal to build up a retirement fund
Knowing your time horizon is important.
This helps you determine how much risk you are willing to take, and what strategy to employ.
2. Not sticking to your rules when the markets turn
It is easy to stick to your investing rules and guidelines when markets are soaring.
But, we often throw out all our rules when the markets turn.
This is where we panic sell, or “buy the dip” without thinking it over thoroughly.
It is important to establish ground rules for yourself.
- Do you have hard limits on when you have to sell/ cash out?
- Are you holding these stocks for long-term? Has your fundamental thinking changed?
Also remember to evaluate & update your rules periodically.
What worked last year may not work well this year.
What worked last year may not work well this year.
3. Not understanding your risk tolerance
Can you really afford to lose it all?
Have you understood the risks of the product or strategy you are undertaking?
Recommended reading: 40-year-old who lost 600k in options trading in 2022: Here’s what he learned!
That is not to say you shouldnt take any risk at all!
Taking sufficient risk is part and parcel of any investing strategy.
You can buy the riskiest stock or derivative – if you allocate the correct % of your portfolio to it.
It all comes down to finding the right asset allocation to match your risk tolerance and goals.
You can buy the riskiest stock or derivative – if you allocate the correct % of your portfolio to it.
4. Not understanding business
Stocks are fundamentally shares of businesses – and businesses do not follow a linear growth path.
A profit-making quarter, can easily explode in the next quarter, in today’s hyper competitive business environment.
Keeping aware of the macro economy, and the fundamentals of the stocks you are buying is always important.
5. Investment is a broad area
Everyone wants to get in early on the next Tesla stock, but how do you identify such moonshot counters?
Stay open-minded, and diversify your knowledge.
Keeping up with current events, business flows, and understanding the macro economy will help you make informed investing decisions.
Financial literacy is something we should keep working on in our lifetime.
Successful investors read, and read a lot!
“I have said that in my whole life, I have known no wise person over a broad subject matter area who didn’t read all the time — none, zero,” Munger commented at the 2003 Berkshire Hathaway annual meeting.
“Now I know all kinds of shrewd people who by staying within a narrow area can do very well without reading,” he added, “but investment is a broad area. So if you think you’re going to be good at it and not read all the time, you have a different idea than I do. . . You’d be amazed at how much Warren reads. You’d be amazed at how much I read.”
When Warren was asked by an interviewer how he achieved success he held up a sheaf of papers and commented, “Read 500 pages like this every day. That’s how knowledge builds up, like compound interest.”
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