Here are three key tips to help you increase confidence as an investor.
1) How to reduce the risk of losing money in the stock market
As highlighted in onboarding tip #8, the key to reducing the risk of losing money in the stock market is Warren Buffett’s Rule #1 Investing.
- Rule #1, don’t lose money.
- Rule #2, don’t forget Rule #1.
What this means is you should train a good habit of only selling stocks for a profit.
That may sound crazy but keep this in mind. Over the last 100 years, there have been about 17 bear markets or recessions with an average downturn of 10 months. This tells us that when the market goes down, it doesn’t go down for long. When your stocks go down, the best strategy is to wait and let them rise again so you can sell for a profit.
2) When to buy
As outlined in onboarding tip #9, buying a stock is a 2-step process.
- When a stock is On Sale or changes to On Sale
- When a stock has a 4M score close to 80 or higher
I typically don’t overcomplicate this. A lot of new investors sit on the sidelines, analyzing and worrying about buying their first stock. I like to remind myself that businesses are in business to solve problems by selling products and services. On Sale means a financially strong stock but a 4M over 80 provides me more confidence on the strength of the overall business.
3) When to sell
As outlined in onboarding tip #10, selling a stock is a 3-step process.
- When a Summary changes from On Sale to Watch or Overpriced. This tells me the financials are getting weaker.
- When a 4M score drops close to 59 or lower. This tells me the overall business is getting weaker.
- When you make a profit. In other words, I only sell when I make a profit.
Following these three tips above can help you reduce risk and gain confidence in the stock market.
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