How to invest successfully
Successfully investing in the stock market, everyone wants to do that! In this article you will find the most important key points you need to achieve successful results as an investor, even as a beginner! Discover the secret recipe for the most successful investments put together by the “Gordon Ramsay of the Dutch stock exchange” and start investing successfully right away!
Point 1: practice, practice and practice!
If you want to invest successfully, it is essential to practice sufficiently. There are different ways you can practice. You can get a piece of old-fashioned paper and keep track of which investments you would or would not take. Then you can calculate what a profitable result would yield using your strategy.
However, it is more practical to directly open an account with a broker. Here you can usually practice as much as you like and without risk by means of a demo. It may be even more sensible to invest first with a small amount, for example 100 pounds. That way you have the tension, but you do not run a big risk.
So keep practicing and investigate why an investment turned out to be successful or unsuccessful. You can keep track of this in a trading journal, which in the long term can become a book full of wise lessons!!
Click here to open a demo account by a broker >>
Point 2: discipline
Just like with everything in life, you need a lot of discipline to achieve successful results. Many traders struggle to act with discipline in the beginning. This is because many people are programmed to listen to an authority. When you invest, no one tells you what to do, and suddenly everything is possible.
In order to avoid blindly and randomly opening all kinds of positions, it is wise to draw up rules. Determine for yourself when you can open an investment, how much money you can risk per investment and when you must get out of it. By setting clear rules for yourself, like a strict schoolmaster, you prevent yourself from losing a lot of money immediately.
Try to use that discipline in other parts of your life as well; in this way you will become more successful. For example, try to exercise regularly and to live a healthy lifestyle to keep your brain sharp. Discipline is a way of life!
Point 3: when in doubt, stay away
It is always unwise to carry out an investment when you are in doubt. Psychological research has already shown that these kinds of emotions can be warning signs of the unconscious; your brain sometimes recognizes certain patterns and can therefore know more than you think. This intuition will become stronger and more reliable as you become a more successful investor.
It is also important to be sure about your investment because otherwise you will act irrationally. People who are insecure about something make faster, unreasonable decisions which can be disastrous for your investment results.
Point 4: follow the flock, but not always
Many novice investors think that they have to be original: when everyone says A, you have to say B. Yet this is often not the case with investments. When rates have been rising for months, it is unwise to bet on a declining market; especially in the short term. Always try to invest in the direction of the trend so that you take the maximum profit and thereby invest more successfully.
Incidentally, there are also situations in which it is unwise to follow the herd. When, for example, negative news comes out, the price of a share can drop enormously. This kind of extreme movement based on a negative news item also often results from herd behaviour. In case of a panic reaction, always try to analyze whether the extreme movements are justified.
Point 5: spread your risks
In the casino, it’s gutsy to bet all your money on red; in the investment world, however, we call this foolish. Successful investors spread their risks as much as possible. You can do this by dividing your investments over various securities, such as buying multiple stocks from different regions and sectors. You can also spread your risks further by purchasing part of your portfolio each month. In this way you prevent yourself from investing all of your money just before an upcoming crisis.
Spreading your risks is also important when trading in the short term. You do this by always applying a fixed percentage to each investment. For example, if you have 1000 pounds in your account, you can decide to risk a maximum of five percent per investment. In this way, an unexpected price movement cannot cause you to lose the entire deposit.
Point 6: control your emotions
If you want to trade successfully in the stock market, it is important to control your emotions. Many people suffer from loss aversion. This is a psychological term that indicates that people prefer to avoid a loss rather than take the chance to earn a similar amount. However, this tendency to avoid losses is your biggest enemy when you want to become a successful investor.
As an investor, it is important to regularly take your losses. Many beginners leave losses too long and take profits too early. This is because people find it very painful to lose. You can learn to take losses by practicing a lot and by using fixed targets. In this way, emotions play a much more limited role in your investments.
Read more about the psychology of investing and managing your emotions to become a more successful investor!
Point 7: successful analysis
It is important to base your investment decisions on something. Therefore, make an informed analysis. This can be done by looking at the technical situation. Check if patterns are visible in the graph and respond to them by opening a position at the right time.
You can also use the news. For example, stocks react strongly to profit figures and other news items that influence profitability. There are many ways to perform an analysis. It is important to discover your own method and to determine fixed, rational rules with which you decide whether to open an investment.
Creating a successful analysis based on a strategy is a process that costs a lot of time. It is often not possible to take over the strategy of another investor, as not everyone feels good about using certain analysis options and risk levels.
Learn the basics of analysis right away with the Plus500 tutorial!
Point 8: pay attention to the costs
Finally, many starting investors forget to look at the costs. However, the costs strongly reduce the return on your investments and it is therefore essential to choose a broker with an attractive cost structure. If you want to invest with a small amount, it is wise to trade in derivates or CFDs. This is best done at an online broker.
Even if you want to buy physical shares with a larger amount, it is important to pay close attention to prices. The difference between 0.5% in costs and 1% in costs is extreme, and increases exponentially over the years. Therefore, take the time to study and try out different brokers.
In conclusion: successful investing
- Successful investing means lots of practice with a demo and later small amounts.
- Successful investing means establishing clear rules and using discipline.
- Successful investing means listening to your intuition and when in doubt, staying away.
- Successful investing means following the trend, but not getting caught up in panic.
- Successful investing means spreading and reducing your risks.
- Successful investing means controlling your emotions and dealing with loss.
- Successful investing means the implementation of a rational analysis that fits you.
- Successful investing means considering the costs and carefully choosing a broker.
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When I was 16, I secretly bought my first stock. Since that ‘proud moment’ I have been managing trading.info for over 10 years. It is my goal to educate people about financial freedom. After my studies business administration and psychology, I decided to put all my time in developing this website. Since I love to travel, I work from all over the world. Click here to read more about trading.info! Don’t hesitate to leave a comment under this article.