How many times has someone tried to sell you the “secret” to successful investing?
Or entrée into some get-rich-quick scheme?
Or whispered in your ear about “winning” indicators?
If you’re like me, then you’ve stopped counting… and you know that the investing game is neither quick nor easy. If it were, every investor would be rich, right?
To count yourself among those who do, in fact, master the stock market, you must first master the three pillars of successful investing.
These three components for success are not flashy and they may not seem sexy, but they do lead to reliable profits.
The First Pillar Of Successful Investing: Education
No matter how on point your investment ideas, if you don’t understand the fundamentals behind how to invest, you won’t make the right decisions… and will lose money.
You need to understand the inner workings of financial markets, the effects of fiscal policies, behavioral finance, and so on.
You could complete a formal or university course to acquire the knowledge you need… or you could teach yourself. Many excellent books and courses are available online.
My point is that you need to make the effort. Investing blindly is a mistake.
Most important, always stay hungry for more. The best investors continue their education long after they’ve earned their degrees.
The Second Pillar Of Successful Investing: Up-To-Date Information
If you’re smart and educated but don’t have up-to-date information, the market will surprise you, and you’ll end up on the losing side.
Financial markets are in perpetual motion, and nobody can predict the future. However, if you know about the latest developments, economic figures, and policy changes, you can better anticipate in which direction the market will turn next.
To get the best information, first, consider your sources. Mainstream media like CNN, Fox News, and even CNBC tend to focus on the most shocking news.
If you’re looking for a more informed opinion, you’re better off sticking to publications from Bloomberg, Reuters, or Forbes.
Moreover, pay attention to what successful investors are saying and how they interpret the news. They have in-depth knowledge of the market and can offer valuable insights.
The Third Pillar Of Successful Investing: Smart Decision-Making
Smart decision-making is the hardest skill to master of the three. We all think we’re smart. It’s the way our brains work.
Fortunately, investors have a way to test this skill—the stock market.
If you have educated yourself and are staying up to date on the markets but are still losing money, then you’re not making smart decisions.
This doesn’t necessarily mean you are stupid. Instead, it could be that emotions such as hope, fear, greed, and regret are clouding your judgment.
The only way to stop emotions from influencing your decisions is through practice. Analyze each trade. You need to become comfortable handling wins and losses and to understand why buys are playing out the way they are.
If you’re new to the game, start with paper trading and stick with it until you’re picking some winners. Then, when you go live, don’t invest all your money at once. Start small and build from there.