If you want to be consistently profitable by Investing in the Stock Market, the vast majority of successful investors will tell you that you need a plan and a strong mentor. And there’s a solid reason for this: both will keep you on track to meet your financial objectives.
While most of us want to be able to successfully manage our own finances so that we can live the life we want, the terrible reality is that many of us never seem to be able to do so. This is usually due to the fact that many people treat investing in the stock market like betting on horse racing.
A reality check on Investing in the Stock Market
Those who invest in the stock market frequently buy and sell stocks at random in the hopes of making a profit. After attending a few weekend sessions, many people enter into highly leveraged markets. Indeed, many people are drawn to these markets because of the apparently big profits, but they forget or overlook the underlying risks, as one of our clients discovered before completing one of our trading courses.
Straight ahead, there are money-making prospects in the stock market, according to a road sign.
Unfortunately, Erica had thrown caution to the wind, believing that after receiving a basic education in trading, she was invincible. And, like many others before her, she wondered: “How difficult can trading really be?” She discovered this the hard way when she crashed and burned big time and, with a damaged ego, chose to put a tourniquet on her life savings in order to avoid losing everything. In fact, her husband requested that she stop trading entirely.
Erica, on the other hand, had never failed at anything in her life and realised that in order to succeed Investing in the Stock Market and constantly make money, she needed to invest in a suitable education. And the good news is that her investment in the Diploma in Share Trading and Investment paid off handsomely, for what started out as a hobby has now evolved into a full-fledged trading business that allows her to live the lifestyle that most people can only dream of.
While you can read the complete narrative of Erica’s journey on our website, I wanted to share it with you because I’ve seen so many individuals inadvertently select the incorrect road and lose tens of thousands of dollars, if not their whole life savings, by investing in the stock market. My goal is to keep you from losing your hard-earned money and to point you in the right direction so you may learn how to benefit consistently from the stock market.
Obtaining the appropriate education is the first step in achieving your financial objectives considerably sooner than you would otherwise. Because, while the profits in the stock market can be tremendous, with some of our traders earning thousands of dollars per week and others making tens of thousands of dollars per month, the losses in a high-stakes game may be just as high if you don’t know what you’re doing.
How to make money by investing in the stock market
The key to accumulating wealth is to do what wealthy people do, which is to have a simple plan or set of guiding principles to avoid overcomplicating Investing in the Stock Market. In fact, I always encourage our students to follow the KISS approach since these four letters play a critical role in learning how to properly trade stocks. Some of you may be thinking of the phrase “keep-it-simple-stupid,” however my interpretation of the phrase is “keep-it-simple-smart.” Allow me to explain.
Keeping things simple is what the most successful traders I know do, and what I teach in our trading courses. Because a plan takes the passion out of trading, those with the simplest trading strategy who know how to manage their risk will undoubtedly be considerably more profitable. Following a simple but effective trading strategy and working with a trading mentor is, without a doubt, the smartest and quickest approach to increase your money.
Unfortunately, far too many individuals still believe that getting profitable is solely for Wall Street geniuses. What is the reason for this? I believe it is largely due to the financial industry’s decades-long promotion that retail investors will be more successful under their ostensibly expert supervision. However, many people have realised since the Global Financial Crisis (GFC) that this is simply not the case. Allow me to demonstrate why.
How to Increase Your Wealth Quickly
In my blockbuster book, How to Beat the Managed Funds by 20%, I demonstrated how you can outperform the average institutional fund manager by investing directly in the top 20 firms in the Australian market. Using these stocks, I built two 10-stock portfolios and estimated the returns over an eight-year period, from 31 January 1997 to 30 January 2005, using a simple buy-and-hold strategy.
The caption reads, “Great plan – could we get some more details on investing in the stock market?” Cartoon figures sit at a table with dollar signs, and the caption reads, “Great idea – could we get some more specifics on investing in the stock market?”
I numbered the firms from 1 to 20 and listed them alphabetically depending on their stock code. I then divided the portfolios into two groups: one for odd-numbered companies and another for even-numbered companies.
All company activities and dividend income were taken into account in the calculations. Portfolio 1 had a rolling return of 156.69 percent, or a 19.57 percent average annual return, while Portfolio 2 had a rolling return of 162.21%, or a 20.28 percent average annual return.
In my latest award-winning book, Accelerate Your Wealth, It’s Your Money, Your Choice, I showed this principle once again by actively trading a portfolio of the top 20 shares on the Australian market over a ten-year period from 2 January 2007 to 31 December 2016, which included the GFC. And, after all company actions were taken into account, the benefit from capital growth and dividends was 225.82 percent, or a 22.58 percent average yearly return.
Clearly, these returns are appealing, but consider what you could achieve if you truly learned how to invest in the stock market.
As you are well aware, no one cares more about your wealth than you, which is why I urge you to take immediate action by following the suggestions below.
To make money in the stock market, there are ten guiding principles to follow.
- Educate yourself and know what you’re getting yourself into: many people are willing to spend years studying in order to earn a formal education in the hopes of landing a job. However, they never seem to have enough time to educate themselves about how to create riches.
- Don’t over-diversify your stock portfolio: keep it between 8 and 12 stocks to minimise risk and maximise returns.
- Most essential, understand how to use a stop loss order to preserve your capital if a stock’s value drops. Depending on the stock’s volatility, I always propose buying at a discount of 10 to 15% below the stock’s buy price, or 15% below the stock’s most recent high price.
- Do your own research instead of taking advice from those who are often less knowledgeable than you.
- Profitability It’s not about how much money you gain on a single investment; it’s about how much money you don’t lose over time when it comes to investing in the stock market. As a result, knowing when to sell stocks is critical, as one guideline alone can make you extremely wealthy.
- Don’t follow the herd; do what the wealthy do. The uneducated put their money into the market shortly before the top and sell out after the crash, according to data. This is why I encourage everyone to remember Warren Buffet’s quote: “Be fearful when others are greedy, greedy when others are scared.”
- Don’t make investing a pastime; instead, invest in yourself and turn it into a business if you’re serious about making money by Investing in the Stock Market for your retirement or lifestyle.
- Investing just for the purpose of earning money should be avoided. To put it another way, don’t be enticed to buy a stock just because it pays a high dividend – this doesn’t make it a safe investment (usually because the stock has fallen so far) and is frequently used to attract mom and dad investors who don’t realise that receiving income is pointless if the risk to your capital is too high.
- Remember the tech crash if you’re searching for a gold mine in small-cap or low-cost stocks. Only invest in top-performing stocks in the market’s top 100. Although low-cost stocks appear appealing, they are frequently wolves in sheep’s clothing.
- Don’t buy and hold for the long haul Because timing the market is significantly more beneficial than investing time. Remember, the study I did for both of my books shows that with the correct knowledge and perseverance, anyone can get good results. Buying and holding will only get you ordinary returns, however learning when to purchase and sell will get you much better returns and reduce your risk.