SessionsBaillargeon994
A lot of my investment opportunities are derived from fundamental investing and cost investing. I adopt strategies similar to Warren Buffett not simply while he is a well known investor but simply because they take advantage sense to me.
That's the answer to successful stock investing. Do not pay attention to anyone just because you think he is more knowledgeable available investing then you are. Rather, aim to think and analyze and browse more on your personal before deciding which strategy most closely fits you. After you have developed your own investment philosophy, stick to it and trust only yourself.
My Investment Philosophy
1. Don't generate losses.
As numerous people already know, Warren Buffett famously help with his two rules available buying a humorous way in which Rule # 1 is "Never Lose money" while rule number 2 is " Remember rule number 1".
Capital preservation is important because a stock which has lost half its value will have to double in value before getting to in which you started. That is why you must be extremely cautious inside your choice of stocks which brings us to rule number 2.
2. Using a Margin of Safety
The margin of safety, simply put is really a buffer that you simply put in place between that which you perceive to become the need for the stock and its price. If you value a regular to be worth 1 dollar and also you only buy it if it is cost is 50cents, then your margin of safety factors are 50 percent.
Deciding how much margin of safety you should share with a regular varies for businesses in different industries and is another topic by itself.
In conclusion, a margin of safety factors are essential to protect your capital in case you were wrong in your initial assessment of the stock pick. This way, even if you were wrong, you'd have purchased the stock in a much lower price then should you have had not catered for any margin of safety.
3. Invest in the future
It's impossible to time the marketplace, however, many people appear to think other wise. They're buying once the stock dips slightly and hopes that soon they are able to sell it for a profit. These folks usually adopt a "hit and run" strategy where they are contented with creating a few 100 dollars every time they make a trade. They likewise have a cut loss strategy where they'll exit the market if the price drops beyond a specific amount within times of acquiring the stock.
The reality regarding the stocks market is that real cash is made a few weeks. If you're frequently entering and exiting the market, chances are that during the couple of days of the real rally in price, you won't maintain the market, thus passing up on earnings.
Investing for the long term also saves you on commissions paid to the broker, capital gain taxes and puts the power of compounding into play. The main difference between trading in the marketplace and purchasing for the long term is significant and cannot be ignored.
4. Knowing when you should sell and when to not sell
Despite the fact that I advocate investing for the long term, i am not saying holding on to my investments forever. When I value a stock, I curently have in mind how much the stock may be worth and therefore curently have an exit price in your mind. The purpose of value investing would be to purchase this stock at a significant discount from its value.
However, there might be times when the market is euphoric and the cost of the stock surges way beyond what I have valued it at. At this time of your time, I'll reassess the organization to see if I've omitted any key news or factors which could result in the rise in price. If my asessment from the company remains the same, I will sell the stock because there is pointless why I should not take benefit of the insanity from the market.
It's important to not be greedy at this time of your time and increasing the exit price you've set. Have an exit price and stay with it.
The reverse holds true also. Most people panic and sell once the price drops and that doesn't seem sensible. Once the price of a stock drops, look into the fundamentals again. If nothing has changed, your assessment of their value should be the same which means that the stock is at an even greater discount then what you previously bought at. In this instance, you need to go ahead and take chance to buy in additional of the stock.
5. Keeping Cash with you when there aren't any good stocks to buy
Many reasons exist to keep cash with you when there aren't any good stocks to purchase. Many people find it difficult to do that. The moment they have some money in hand they want to buy some stocks because if they don't, they feel that they are not in the market and thus not "investing".
Also, keeping money with you allows you to capitalize on sudden dips in the stock prices because of some market fluctuations which are not resulted from the alternation in the businesses fundamentals. In these instances, you need to average down and buy much more of that stock. The worst thing that may take place is not having cash to average recorded on an order which has now presented a larger discount then before, due to your need to always keep all of your money in the marketplace to "feel that you're investing".
