5 Principles Help You Beat the Market

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Buying stocks is a very simple action, however, it is the choice of the specific company you invest that matters. So, whether you’re searching for a portion tips for investing, here would the five methodologies you ought to take after for a speculation that will ceaselessly beat the stock market.

1.PICK THE GOOD COMPANY

By buying in company shares, you would become a shareholder of the company, so you should avoid picking stocks an abstract concept. The information you get from your potential business partners might be misunderstanding. It is important to understand and process all the data. When you buy a company share, it is important to understand how the company operates, the position that the company in the industry, how many competitors the company has. You should know that the long-term goal of your investment is to making profit. Thus, pick the promising industry and the leader of the industry.

2.KEEP JOURNALS

Sometimes, investors tend to adjust their stock positions. This move may lead to classic investment errors like the decision to buy high and sell low.

Here, keeping a journal will be helpful. You can write down the reason, time, and the price of each stock you buy in your portfolio. When performing this operation, you must be clear-headed and write your investment analysis clearly. When you decide to sell the stock, you should look through the previous journal to see if it conflicts with your record at the time. At the same time, you should also pay attention to the reasons why other investments must be terminated, and record the reasons. When you resume trading in the future, you can analyze the reasons to see if your decisions are all right and make adjustment.

For example: when buying, you should list down the reasons why you find this investment worth it to buy and its potential in the future, your expectations, your judgments, the possible downfalls, and mark which will be the game changers and which will show signs of a temporary setback.

When selling, you should also write the reason why you will sell a stock. It should bear the basis for the fundamental changes to the business that will affect your ability to grow over time and not the price movement.

3.FOCUS ON COMPANY VALUE

It's hard not to pay attention to the amount of profit and loss every time you check your stock account. This may lead to overreaction to short-term events, such as focusing on current stock prices rather than company values. From here, you will feel at a loss.

Generally speaking, the stock price should reflect the actual value of the company. But when one of your stocks experiences sharp price fluctuations, you need to find the factors that trigger the fluctuations. For example, your stock may become a victim of collateral damage due to the market's reaction to unrelated events.

Usually, when investing, it is the investor’s response to noise, not short-term noise, such as negative headlines and price fluctuations. Focusing on company value and keeping calm will help you invest in stocks.

4.TAKE YOUR TIME IN BUYING

Time is a superpower for investors. Investors get returns through stock appreciation and dividends, but some investments may take a long time. Therefore, being patient with investment is important.

Therefore, when investing in stocks, the following three strategies will prevent you from being exposed from price volatility.

------Dollar-cost average –This means that you must invest a certain amount of money on a regular basis (for example, once a week or once a month). You can set the purchase amount, and you will buy more shares when the stock price drops and fewer shares when the stock price rises. Overall, this will make the cost of your stock more even.

------Buy in thirds –just like the Dollar-cost average, this will help you avoid demoralization due to uneven results. You can divide the amount you want to invest by three, and then choose three separate points to buy stocks. It can be a fixed time interval, such as monthly or quarterly, or it can be based on performance or company events.

------Buy the basket –If you can’t decide which one to buy, you can buy a basket of stocks to remove all the pressure to pick the best stocks. Investing in all possible best players means that you will never miss any one. You can even use investment income to make up for any losses.

5.STAY CALM

"The success of investment has nothing to do with IQ. What you need is the temperament to control the impulse that drives others into investment trouble." This is Berkshire Hathaway Chairman Warren Buffett's advice on investment.

Buffett is an investor who decided to use his mind instead of guts. Excessive trading is actually caused by emotions, which is one of the most common ways for investors to destroy their portfolios. Just stay calm when you trade, and you would benefit from it.