10 Tips for the Successful Long-Term Investor

vengabeats

Par 100 posts (V.I.P)
Many investing websites have hot stock picks and tips - most of which never pan out. Problem is, stock picks aren't what makes you a successful investor. They key to making money in the long run is understanding the fundamental principles of investing.

1) Use the Stop Loss order - Stop loss orders are so simple, yet seemingly undiscovered in the investing world. A common rule of thumb is setting a stop loss order for 15% below the price at which you bought. Keep in mind this percentage can vary depending on both market conditions and your investing style, the point is to limit your losses on any particular stock.

2) Sell the losers and let the winners ride! - It is human nature to make this mistake. Time and time again, investors take profits by selling their appreciated investments, but, in hopes of a rebound, hold onto stocks which have declined. Usually the stock, then, becomes too worthless to bother selling. Ask yourself: "why would I want to keep a bad investment, but get rid of a good one?"

3) Never invest on tips - Whether the tip comes from your brother, cousin, neighbor, or even broker, nothing is ever for sure. Do your own research and analysis of any company before even considering investing your hard earned money on a tip.

4) Most mutual funds don't perform - Because some of them are worthwhile investments (especially for those with no time or desire to manage their own money), we don't want to bash all mutual funds . The truth is, however, that over 70% of mutual funds fail to beat or meet market averages such as the S&P 500.

5) Stop worrying about the 1/8th - If you are a small investor (under $2500 per trade) then you are better off using a market order. A true long term investor looks at the big picture and does not worry about the 1/8th or 1/16th of a point you might gain on the limit order . *Editors note: since the writing of this article, decimalization has made fractions extinct. The point remains, don't worry about the small stuff when investing for the long-term.

6) Pay little attention to the P/E ratio - A low P/E ratio doesn't necessarily mean a security is undervalued. It could mean the company's earnings are flat or slowing. The P/E Ratio is useful only to compare companies in the same industry or in the market in general. For more on how to use the P/E ratio correctly, see our tutorial on the subject.

7) Don't try to "time the market" - Trying to detect when the market is going to move up or down isn't only hard, but impossible. Don't even try. If people could time the market, we'd all be wasting away in Margaritaville with a drink in each hand! This is not to say, however, that utilizing technology to assess trends is not in order. Large brokerage houses have sophisticated computer-based algorithms with which they attempt to technically analyze the market. Just as daily cost averaging, over sufficient time, will accrue gains, so will a disciplined, systematic approach by the individual investor. Stock trading programs are evolving, and will assist the individual investor to organize and systematize his or her trading habits. However, keep in mind that there is no "holy grail."

8) Waiting for the market to correct - Believing that the market is overvalued and waiting for stock prices to correct before investing will often get a long-term investor in trouble. According to the laws of compounding, the earlier you invest, the higher the return. If you have the money now, for goodness sake, invest it before it ends up going towards unplanned expenses.

9) 401ks are free money - Never give up the chance for matching your employer sponsored savings. Invest $1000 a year, and with your employers contribution of $1000/yr and you are already up 100%. ( 401ks are American, but most countries have similar employer sponsored retirement investment plans).

10) Price is irrelevant - Just because a stock is trading at $100 or higher has no relevance to future performance. Never avoid buying a stock because you think it is too expensive and can only afford 10 or 20 shares. For example, one of the most successful companies in history is Berkshire Hathaway. It trades in the thousands of dollars because they've never done a stock split . If you had avoided buying this stock back when it was at a seemingly "expensive" $1000, you would of missed out on big gains.

These tips are by no means the only way to make money in the market. They are, however, ten pieces of solid advice that will help you come out on top in the long run.
 

vesh

New member
hi there is one question for you. i want to invest now and i have about 20,000 cash in my hand. I want to know where to invest this cash.

:fear:​
 

milind20

Par 100 posts (V.I.P)
hey nice to kno tht u r intrsted in trading nd earning money.....
but but.....this is a risky kind of invstmnt so u need to do ur homework pretty well b4 trading.....
the basic rule in tradin is tht u gotta invst in shares onlu aftr u gotta news frm a very reliable source.......by this i mean tht ur broker or may be the CNBC channel tht u mite be watchin......

so frst u shud go find a relaible info bout any particular stock/stocks nd thn invest in them collectively.......

one thng u shud remmbr is tht u shud not invest in only 1 or 2 shares.......u shud diversily so tht if unfortunately one runs into losses thn the losses wil b covered.......

all these nd many more thngs u shud keep in mind bfre investing.....
 

vengabeats

Par 100 posts (V.I.P)
I suggest u should start with investing in Mutual Funds because you are a Freshiar and markets are also on a Bull run so it is not the time to enter the markets and also there is a news of KETAN PAREKH IS BACK
 

milind20

Par 100 posts (V.I.P)
venga....nothin aginst u but i dont thnk tht is true.....
if the markets r on a roll doesnt always mean tht ther is some speculation here......
no need to pass unnecessary panic in the minds of the investors......
 

vishal_1986

Par 100 posts (V.I.P)
vesh;....i would suggest... 1st try in learn and get as much info as to how stock markets run.. how one deals with a particluar stock...n frshers lik us..especially... otherwise... for u..its better u put in money into Mutual Funds.. but thn thr also...lots of things 2 understan...how they calculate NAV...wht rate they give bac...i mean the diff Mutual Fund Dealers...so 1st get info on the best dealer..i think BOB is the best at present...also UTI
 

nick18_in

MP Guru
Hi Vesh..
I would like you to put that money as FD with some good bank, wherein u will get some good rate of interest..
Till then you can learn to put in money in the shares or some other place..
This reply is on a personal basis... as I would like you to learn more about investing moeny in the market.. & now a days theres a great risk in it..
So take care & then put in your money... ;) :)

take care
 

ViJiT

Vijith Pujari
vesh said:
hi there is one question for you. i want to invest now and i have about 20,000 cash in my hand. I want to know where to invest this cash.

:fear:​


well u need a bank account[ICICI] and a broker account like sharekhan or ICICI demat account itself...


after havin both of these ...there is a 3 day class at VT which will teach you .how to trade online and stuffs which will be useful...if your interested then i will forward you the address of the classes...
 
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