5 Essential Tips for Investing in Stocks

  • 1. Check your emotions at the door
  • “Success in investing doesn’t correlate with IQ … what you need is the temperament to control the urges that get other people into trouble in investing.”
  • 2. Pick companies, not ticker symbols
  • It’s easy to forget that behind the alphabet soup of stock quotes crawling along the bottom of every CNBC broadcast is an actual business. But don’t let stock picking become an abstract concept
  • Remember: Buying a share of a company’s stock makes you a part owner of that business
  • 3. Plan ahead for panicky times
  • All investors are sometimes tempted to change their relationship statuses with their stocks. But making heat-of-the-moment decisions can lead to the classic investing gaffe: buying high and selling low.
  • Write down what makes every stock in your portfolio worthy of a commitment and, while your head is clear, the circumstances that would justify a breakup
  • 4. Build up positions gradually
  • Time, not timing, is an investor’s superpower. The most successful investors buy stocks because they expect to be rewarded — via share price appreciation, dividends, etc. — over years or even decades
  • 5. Avoid trading overactivity
  • Checking in on your stocks once per quarter — such as when you receive quarterly reports — is plenty. But it’s hard not to keep a constant eye on the scoreboard.
  • When one of your stocks experiences a sharp price movement, find out what triggered the event. Is your stock the victim of collateral damage from the market responding to an unrelated event?
  • Has something changed in the underlying business of the company? Is it something that meaningfully affects your long-term outlook?

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