Making money in the stock market is easy, even if the rules of thumb you should follow may sound strange at first. Master investor Warren Buffett can show you the way.
Are you ready to turn up the heat on your long-term investment portfolio? The five strategy tips below can help you make serious money in the stock market and beat it, as well.
But don’t worry — you don’t have to be a financial wizard to make it happen. Anybody can use these money-making tricks, one by one or all together.
I’m not reinventing the spoon here, of course. My repackaged nuggets of firmly established wisdom might be just what you needed to hear, and if not, please feel free to explore the Motley Fool’s sensible investing style on your own .
Now, let’s get started and make that money work for you. 1. Market timing is a gamble
Don’t try to time the market. Nobody really knows when the next upswing or downswing in the global economy might occur. The minute you think you have it all figured out, some completely unpredictable event turns Wall Street upside down and inside out, like the city streets in Inception or Doctor Strange .
Instead, focus on buying and holding quality investments. Great companies create shareholder value in the long run. Learn how to find these long-term winners amid a noisy horde of wannabes and impostors, invest in them when share prices are at their least reasonable, and hang on through the twists and turns of the bumpy road that lies ahead.
Congratulations! You’ve just ripped a few pages from the legendary playbook of master investor Warren Buffett . He never plays the market-timing game, and it’s a good idea for you to stay away from it, too. 2. Mo eggs, mo baskets
This one is simple. Diversify your portfolio to minimize risk and maximize returns.
You heard me right. Betting the farm on a single stock may feel like a good idea from time to time, but there’s always a real risk that things won’t work out.
In the stock market, a large selection of well-run companies will outplay and outlast any hyper-focused strategy in the long run. So you might want to start with a diversified basket of stocks , such as the low-fee Vanguard 500 Index Fund , which tracks the approximately 500 components of the S&P 500 market index.
This way, a single stock or even a whole market sector could crash and you’d still be fine. There’s safety in numbers, and you can always add handpicked stocks to that wide-ranging foundation as time goes by.
Again, Warren Buffett made his fortune by investing in a broad-based collection of top-quality businesses — and he has also bought a ton of the Vanguard 500 Index Fund. You’re running with some great role models here, sport. 3. The power of knowledge
Here’s how you should go about finding those handpicked stocks that look ready to beat the S&P 500 in the long run. Wouldn’t you know it — we’re knocking on Warren Buffett’s door again.
It’s a good idea if most of your investments involve companies with strong financial results, including a healthy balance sheet, steady profits, and a history of paying dividends. This core of unshakable business titans (plus, perhaps, the index funds we talked about a minute ago) will give you a wealth-building platform from which you can launch smaller explorations of more promising but also riskier stocks.
Both of these stock types require a deep understanding and serious analysis before you put your money to work. Buffett keeps his nightstand stacked with annual reports. Know the difference between revenue, earnings, and cash flow, measuring each company against its most appropriate financial metrics. 4. Flexibility for the win!
Don’t be too rigid. The rules outlined above come with exceptions, and no rule of thumb should be set in stone. It’s important to have a plan, but it’s even more essential to roll with the punches and be willing to make adjustments as your investment goals or circumstances change.
For example, Netflix used to be all about subscriber growth at any cost, kicking long-term profits down the road for many years. Now, the media-streaming veteran has reached a tipping point where it makes more sense to focus on free cash flow and top-line revenue at the cost of potentially slower subscriber growth
Smart investors have already adjusted to Netflix’s updated strategy. The rest of the market should catch on eventually.Stop me if you’ve heard this before, but you’re walking in […]
source 5 Surprising Strategies for Building Wealth in the Stock Market
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