How do you invest successfully?
Anyone can invest in stocks, mutual funds, index funds, ETFs, or in real estate. But how many know what they are doing? How do you invest successfully? Successful investing requires an understanding of the following six tenets:
Ignore the Noise
Ignore the "noise" in the media. Ignore the so called "experts", the internet, television, and magazines are full of "advice" that will lead you astray. Remember the media are corporations that exist to make a profit, and profits come from increasing viewership and advertising. The media's best interest will not be your best interest. Educate yourself on how to invest and then implement what you've learned.
Seek out quality companies to invest in. Quality companies are those that:
- have a history of profitability
- have a history of paying increasing dividends
- have low debt
- are recession proof
- have a competitive advantage in the marketplace
How do you find quality companies? Follow my 12 Rules of Simply Investing.
Buy Low (Undervalue)
Once you've found quality companies to invest in, you need to make sure the stock is priced low or on sale (undervalued). Why? Because buying low (undervalue) will help you to maximize your return. If a stock is undervalued at $20 and overvalued at $50, there is no point in buying the stocks at $48, $49, or $50 because the price is already too high; there is very little room for the stock price to go higher. On the other hand buying the stock at $20 or close to it ensures maximum profitability for you. How do you find undervalued companies? You can read about finding undervalued stocks here.
Reduce or eliminate the fees you pay for investing. No one cares more about your money than you. Your financial advisor cares more about their commission and income than about your money. You owe it to yourself and your family to take ownership of your own money. Don't give away your money to someone else to invest on your behalf, otherwise you will pay thousands in fees.
You have to have the courage to buy quality stocks when they are undervalued. Stock become undervalued because they are temporarily out of favor by investors. Therefore you have to have the courage to buy an undervalued stock when the majority is staying away from it. If you've followed the 12 Rules of Simply Investing you've minimized your risk, and must have the courage to proceed with investing in the undervalued stock.
You must have the patience to hold on to a stock even if the stock market declines. Also stock prices go up and down all the time, and you must have the patience to stick with your investment. Your patience will be rewarded with increasing dividends over time. As the dividend goes up over time so too will the stock price, but sometimes this can take years, therefore patience is key.
It all starts with knowledge, the knowledge of how to find quality stocks that are undervalued. Then successful investing is as simple as: buying quality stocks when they are undervalued, and holding for the rising dividend and stock price.
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