Investing and for that matter becoming a better investor is one of the keys to achieving financial freedom.
If you’re looking to improve your investment skills, you’ve come to the right place. I’ve been active in investing since 1995 and have helped hundreds of multi-millionaires invest their money over the past decades representing the two large Swiss Private Banks in Asia.
In this blog post, we will look at 20 different ways to help you become a better investor. We will discuss how to manage your emotions, how to build a long-term mindset, how to take advantage of volatility, how to identify opportunities, and how to make sure you follow through on your investment plans.
Follow these tips and you’ll be well on your way to becoming a better and [more] successful investor!
Investing is how you achieve financial freedom. Click To Tweet1. Never Stop Learning
Like most things in life: Never stop learning. But don’t learn a lesson more than once! Have a journal, or someplace where you can keep track of what you’ve done, what was better, and what was worse. Make sure to review your mistakes so that you don’t make them again.
Sometimes you win, sometimes you learn.
And how do you learn? Read books (duh) – click here for some recommendations, follow financial blogs (yes, like this one right here) talk to other investors, go to seminars, and/or take an online course.
The best thing you can invest in is YOU!
The goal is to continuously grow and develop as an investor.
Remember: Even the best investors are still learning new things every day.
In fact, Warren Buffett spends around 80% of his working time reading!
Learn from history and the experts if you do have the chance.
“The four most dangerous words in investing are: ‘this time it’s different.’” — Sir John Templeton
2. Be Open-Minded
It’s easy to get trapped in your own little world, especially when it comes to investing. But if you want to be successful, it’s important to stay open-minded.
Some investors have their whole investment identity tied to a specific worldview and are not even considering anything outside their area of expertise. This could be the 100% bitcoin dude avoiding anything else as well as the old-fashioned dude avoiding bitcoin.
Be open to new investment opportunities, be willing to change your mind, and don’t be afraid to experiment. Start with smaller amounts for new ventures first.
Remember: You don’t know everything, so it’s important to listen to other people’s opinions (especially when it comes to investing).
If you’re always the smartest guy in the room, you might be in the wrong room!
However, beware: Unsolicited advice is oftentimes full of shit.
Do your homework.
But culture your own ability to expand or change your mind every once in a while.
3. Do Your Own Research
One very important lesson is to only invest in things you truly understand. If you don’t understand, don’t invest. In order to understand more, research more. This means reading books, articles, watching videos, talking to and with other investors etc. regularly.
The more information you have, the better equipped you’ll be to make informed decisions about your investments.
And remember: just because someone is an expert doesn’t mean they’re right all the time!
So always do your research before making any major decisions.
4. Avoid Following the Herd
When it comes to investing, following the herd can be a very dangerous game. Why? Because most people follow the herd without doing their own research – and that’s how you end up with bubbles and crashes.
Don’t be afraid to go against the grain (especially if you’ve done your own research).
In fact, this is how many successful investors make their money.
Remember: Just because everyone else is doing something, doesn’t mean it’s the right thing to do!
Luck and investing skills are not the same things.
They are not to be confused.
“The individual investor should act consistently as an investor and not as a speculator.” — Ben Graham
5. Understand Survivorship Bias
Others mostly share their wins but seldom their losses.
Naturally, you’ll be more exposed to successful investment stories while failures are being carefully removed and deleted from our collective memory.
That’s called survivorship bias, and it’s something you should be aware of when listening to (or reading) investment advice from others.
Most people only remember – or talk about – their successful investments, but not the failures.
Understand that most of what others present to you might be their highlight reel, so always take everything you hear with a grain of salt before making any decisions.
6. Manage Your Emotions
One of the biggest challenges that investors face is managing their emotions.
It’s important to remember that investing is a long-term game and short-term fluctuations should not impact your decision-making.
The best way to deal with these emotions is to have a plan in place before they arise. This way, you can stick to your plan no matter what happens!
The goal is to be as emotionally stable as possible when it comes to investing. After all, investments are a long-term game – not a sprint!
Make it a priority to learn how to manage your emotions.
Stand your ground.
The market goes up, the market goes down, we will have recessions on a regular basis and yet, if you invest and stay invested, you will win.
Practice meditation or mindfulness, and go for walks if the going gets tough.
Sleep over hard decisions before taking a red hot wrong decision or action.
Be patient – investing is turning impatient people to patient people.
7. Have a Long-Term Mindset
Investing is a long-term game, and it’s important to have a long-term mindset if you want to be successful.
Investing is a marathon, not a sprint.
This means thinking about how your investments will perform not just next week or next month, but five years from now, ten years from now, or even longer.
This means looking at investments not as short-term opportunities, but rather as long-term commitments. You should have a clear idea of your investment goals and how you plan to achieve them.
It’s also important to be patient – remember, the stock market is a long-term game!
Never make permanent decisions on temporary feelings!
To be a successful investor, you need to have a long-term mindset, a solid plan, and stick to it.
“Invest for the long haul. Don’t get too greedy and don’t get too scared.” — Shelby M.C. Davis
8. Have an Investing Plan
Investing without a plan is like driving without a map: You might end up going in the right direction, but it’s much harder than it needs to be. Or you might get completely lost.
A good investment plan will keep you focused on your long-term goals and help you avoid making emotional decisions. It must include your investment goals, how you plan to achieve them, and how much risk you’re willing to take.
It’s also important to review your plan regularly and make adjustments as needed. Life happens, and things change – so make sure your investment plan reflects that!
Investing without a clear plan is a recipe for disaster.
A plan is essential for success in investing. Without a plan, it’s easy to get caught up in the emotions of the markets and make impulsive decisions that you’ll regret later.
Stick to your plan!
“When you invest, you are buying a day that you don’t have to work.” — Aya Laraya
9. Understand the Difference between Price and Value
One important concept to understand is the difference between price and value. Just because something is expensive, doesn’t mean it’s valuable or a good investment.
“Price is what you pay, value is what you get.” – Warren Buffett
Value is based on how much an asset is worth, not how much it costs.
This is an important distinction to make when assessing investments.
“All intelligent investing is value investing. Acquiring more than you are paying for. You must value the business to value the stock.” — Charlie Munger
10. Keep it Simple
Investing doesn’t have to be complicated, the best investments are usually the simplest ones.
Don’t overthink things or try to make things more complicated than they need to be.
The goal is to find investments that you understand and that fit your goals. Once you’ve found these investments, stick with them!
Once you found something more complex beyond what you’re familiar with, invest some time before jumping investing into them.
Options and futures, commodities, currencies, and hedging are all interesting things, but learn about them first!
11. The Answer to Most of Your Questions
“It depends” is the correct answer to most of your investing questions.
This may not seem like a very helpful answer at first, but it’s of utmost importance to understand its implications. In personal finance, there is no one-size-fits-all approach.
It’s more like the 50 shades of investing!
What works for one person may not work for another.
The best way to find out what will work for you is to experiment and learn from your mistakes.
12. Focus on What You Can Control
There are many things that we can’t control when it comes to investing, such as the direction of the markets, the ongoing news, or ultimately the short-term performance of individual stocks.
What does it help if you focus on any of them?
Learn to focus on the things that lie within your control.
Some of these things include how we react to how the market performs, how diversified our portfolios are, and how much risk we’re willing to take on.
Focus on the things that you can control and don’t worry about the rest!
13. Know What You Invest In
When you invest in something, you should have a clear understanding of what it is that you’re investing in.
Don’t just blindly follow the advice of others – do your own research and make sure you understand what you’re buying.
Investing isn’t about taking risks, it’s about finding opportunities.
And the best way to find opportunities is to educate yourself and stay up-to-date on current market conditions.
The individual investor should act consistently as an investor and not as a speculator. This means that he should be able to justify every purchase he makes and each sale he completes by impersonal, objective reasoning that satisfies him that he is getting more than his money’s worth for his purchase.
“Behind every stock is a company. Find out what it’s doing.” — Peter Lynch
14. Stay Disciplined
Investing requires discipline.
Successful investing requires lots of discipline.
You need to be patient and wait for the right opportunities, rather than chasing after every hot stock tip you hear.
You also need to be disciplined enough to stick to your investment plan, even when the markets are going through a rough patch.
Yes, it can be difficult to stay calm when everyone around you is panicking, but remember – if you’re investing for the long term, short-term fluctuations shouldn’t bother you too much.
Stay the course, you do you, don’t compare yourself with others.
It’s easy to get caught up in the emotions of the markets, but it’s important to remember that these emotions are temporary and that the markets will eventually recover.
If you sell your investments when they’re down, you’ll never be successful in the long term.
15. You’re in Charge
If you can’t handle the heat, stay clear of the fire.
Great investors are responsible investors: They retain the ability to respond.
No matter what.
They are in charge.
They’re the ones who learn from their mistakes.
The moment you start blaming others for your losses and refuse to accept responsibility for your actions, you start to lose.
“This company looks cheap, that company looks cheap, but the overall economy could completely screw it up. The key is to wait. Sometimes the hardest thing to do is to do nothing.” — David Tepper
16. The Eighth Wonder of the World
Compound interest is the eighth wonder of the world. Click To TweetIt’s one of the most powerful forces in the universe indeed, yet so few people understand how it works or how to take advantage of it.
In simple terms, compound interest is when you earn interest on your investment, and then you earn interest on that interest. It’s when your money starts to have babies that in turn have babies again.
Over time, this leads to exponential growth.
More often than not, time in the market beats timing the market.
If you want to become a better investor, start by taking advantage of compound interest. reinvest your earnings and let your money grow over time.
“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” — Albert Einstein
17. Risk Management
Risk management is a highly important part of investing.
Managing risk starts with ensuring your investments are aligned with your goals and overall risk tolerance. It can also include strategies about how you protect your capital from losses or yourself from losing your purchasing power over time.
There are many different ways to manage risk, but some common strategies include choosing the right asset allocation, getting diversification right, using stop-loss orders, and hedging.
You need to find the right balance between risk and reward for you, and always remember – don’t put all your eggs in one basket!
“If you don’t diversify, you’re taking on too much risk. Simple as that.” — Tony Robbins
18. Take Advantage of Volatility
Volatility can be your friend! If you’re a long-term investor, short-term fluctuations in the market should not concern you.
In fact, these fluctuations provide opportunities to buy stocks at a discount.
The key is to have a plan and to stick to it.
Master your Fear and Greed!
“A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett
Dollar cost averaging is a great strategy to take advantage of volatility.
19. Have Realistic Expectations
It’s important to have realistic expectations about the returns you can expect to receive from investing over the long term.
If you’re expecting to double your money overnight, you’re going to be disappointed.
Get rich quick schemes are usually a guarantee to stay poor forever.
Grow beyond this false belief.
Gains in the stock market are typically made gradually over time, it’s about making your money work hard for you so that you can achieve your financial goals.
If you’re thinking about how you can make a quick profit, you’re more likely to make impulsive decisions that you’ll regret later.
Instead, focus on how you can build your wealth over time.
Of course, there will be ups and downs along the way, but don’t let these short-term fluctuations deter you from your long-term goals!
20. Review Your Progress Regularly
You should review your progress regularly to make sure you are on track to reach your goals.
This doesn’t mean that you should obsess over your investments every day, but you should check in periodically to see how things are going.
If you’re not happy with the progress you’re making, don’t be afraid to make changes to your strategy, your asset allocation, or your risk preference.
If you feel, you’re no longer on track, it’s time for a change.
Bear in mind, that investing is a long-term game.
Remember – it’s not about timing the market, it’s about time in the market!
While conducting a review, ask yourself the following questions:
Was I happy with the recent outcome of my investments?
Did my life situation, my goals, or my risk preference change?
Are my assets working hard enough or are some of them laying around idle?
Activate your assets.
Treat every dollar that you have like your employee, send them to work!
But remember – slow and steady wins the race!
Bonus Point: Have Investment Principles
Investment principles are important because they help keep you focused on your goals. They also provide a framework for making decisions about which investments are right for you.
Some examples of investment principles might include:
– invest only in what you know
– never invest more than you can afford to lose
– always do your own research
– buy low and sell high
Having investment principles will help you stay disciplined and focused, which are two essential qualities for any investor.
“I make my money by selling stock to people who think they can predict the future better than I can.” — Peter Lynch
Conclusion
There you have it, these are just a few of the many things you can do to become a better investor.
Of course, this is just the tip of the iceberg.
The most important thing is to never stop learning and to keep expanding your horizon.
Now that you understand how to become a better investor, it’s time to put these tips into action! Stay disciplined, do your own research, always be willing to make changes if something isn’t working for you, and always think long-term.
If you follow these tips, you’ll be well on your way to becoming a successful investor!
Do you have any other tips on how to become a better investor? Share them in the comments below! And don’t forget to share this article with your friends if you found it helpful!
If you have any questions about investing, financial independence, early retirement, or life in general, consider booking a free consulting call with me right here.
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Happy investing!
Matt