True, most people understand the concept of investing: exchange your money today for a company you hope will earn you more money over the coming years. While this may seem simple, what we have seen in reality suggests that doing it “right” and succeeding in it is far from easy. Those who have proven their mettle have done it differently from in their own ways --- take Warren Buffett, James Simons, and George Soros, who have made it big with varying approaches to investing. As the market evolves and becomes more complex, every investor, whether freshman or veteran, needs three essential tips to secure a return on their investments.
1. Know what kind of an investor you are and make sure your investments are consistent with that. Is your personality fit for a “speculator,” looking to maximize on short-term movements? On the other hand, are you the “investor”; more interested in buying stocks off a great business to hold on the long-term? Your chances of succeeding depend on how and where you put your money on the market.
2. Think independently and avoid becoming a market lemming. The thing that draws the crowds is not always the wisest thing to follow. This particular bandwagon syndrome that focuses on short-term results makes investors “act like a herd of crazy lemmings.” It pays to be independent in making decisions. Take Warren Buffett’s example. During the tech boom, almost everybody placed bets on short-term tech companies while Buffett stuck to his long-term investment methods on “boring” companies like Gillette. Rookie investors criticized Buffett for his “relic” style. Eventually, the tech bubble burst and Buffett proved them all wrong.
3. Do not rely too much on stock tips. Sure, stock tips can help point you in the right direction, but it is wiser to research on a stock first and buy it for a good reason.
Investment takes practice. Eventually, you will get better at it, especially when you unfailingly consider these 3 essential tips in your decision-making.
