Do you want to be Wolf Of Wall Street!,Check out these 8 rules of stock market for intelligent investors to gain high yields and maximize profits.
Investing requires a series of choices in ever-changing environment of stock, bond and commodity markets. The overvalued bull markets granted the investors with all possible yields for several years in sequence and now it is time to challenge the roundabout. No doubts, markets are always correcting themselves and thorough analysis and smart diversification will make it entirely possible to beat the market over time. Here are some rules for intelligent investors to follow to reach their goals in investment markets:
1. Find undervalued assets
It might seem incredible during current global investing environment where exchange of information is accessible instantly to all investors around the world; however the history proves that the investments based on thorough financial analysis always prove right. In Graham words, buy a dollar, which costs 50 cents today, i.e. find undervalued assets and securities to invest. To note, Graham was the teacher of Warren Buffett, who later worked at his company and highly appreciated him.
Benjamin Graham, a renowned professor and investor himself studied the phenomenon of Intelligent Investment on scientific level and published his book “The Intelligent Investor” in 1949. His success in stock markets came after the great stock crash of 1929 where he lost great deal of money, but it made him learn all life lessons and minimize the downside risk of investments. In his later life, he made on average 20% annual return on stock market trading.
2. Use the market moves
Markets respond to surprises with volatility and more surprises are yet to arrive in 2017, as well. Here is the market cycle of emotions which shows that surprisingly enough the periods when market pessimism hits the ground are always the best time to buy, and when markets climb up the peak of investors’ optimism, you’d rather start selling to gain the most benefits of bull markets. Remember the golden rule of investing “Time is your friend, impulse is your enemy.”
3. Screen the company
As an investing guru, Warren Buffett said; only buy something that you’d be perfectly happy to hold if the market shut down for 10 years. Buy-and- Hold strategy, also known as Fisher approach will work the best if you trust in great success of the company over next decades. You might consider companies like Google, Apple, CISCO, Tesla, Amgen, and CVS, to name a few. Think of Apple’s valuation, its stocks are still hitting all- time high as of April 2017 surpassing the price of $140 per share, as the Company reports better earnings and pledges for better performance in 2018.
4. Make your purchase good
Expect solid gains from good business. So, before pursuing new stocks make sure you completely understand the nature of the company. Then you can recognize exceptional companies and predict their potential growth. Pay attention to good management. Bill Ackman and Carl Icahn, successful investors of all times, buy poorly managed companies and guide the company to success aiming to generate higher profits later. It’s a hard job indeed, but once you manage everything properly, rewards are guaranteed.
5. Spend less and Save more
Sounds banal, of course, but ordinary investor should avoid high-cost investing platforms and financial advisers. The high fees paid will eventually wear out all the profit you are making. Consider investing in funds that have huge trading volumes and will ensure the liquidity of your assets any time you need to withdraw them. Your monthly savings in IRA or 401K accounts can also be a good source of your investment.
6. Diversify your portfolio
Actually different asset classes are inversely correlated and if you are to invest a significant amount, I’d advise you allocate your funds in uncorrelated set of asset classes. For instance, investors turn to Bond ETFs during more volatile market conditions to create safety pillow for declining stocks. Consider Large-cap, Mid- cap, Small-cap investments, as well as buy ETFs of emerging markets. They can provide you with higher growth potential.
7. Review your investment
When was the last time you monitored how well your investment is allocated? People often make investment bets and then do nothing for years, even decades. Consider your time horizon and avoid very long shots. Review periodically — once a year is adequate. Make sure the allocation mix still makes sense for your current life situation.
8. Build up your empire
It may seem quite complicated to understand trading charts and formulas at first, but once you set up certain investment rules for yourself and follow the upcoming trends in the markets, things will start working for you. As Albert Einstein once told, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”