Key Conditions For Becoming a Good Investor.|ManualTrader

Key Conditions For Becoming a Good Investor.

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Being an investor must be able to differentiate between information that is relevant and that which is not. As an investor, you need to be able to separate the useful and the irrelevant information. An excellent example of an information bias is the fact that you tend to judge all information that is not relevant. A good investor will always discard irrelevant information. You will be able to distinguish between news articles that are not based on fundamental analysis.

An investor should be patient when it comes to investing. It takes time and effort to learn how to invest and become a successful investor. A good investor has a regular schedule and does not rely on fads. In fact, last year's winners may be yesterday's losers. By using automatic deductions from your checking account, a successful investor will regularly invest and build wealth.

For all active investors, the most important and only goal is to create long-term investment performance that can beat the market, and to continue to stand firm in the market no matter how long or short the market is. If you are like me with this goal, If you want to be an excellent investor, then I think you need to meet three conditions, one is "stock selection", the second is "fund allocation", and the third is "psychological quality", all of which are indispensable.

In order to learn investment well, I have read hundreds of investment-related books over the years, many of which are classic masterpieces by investment masters, but I find that no matter the content is difficult to understand or easy to read, almost all the topics discussed are inseparable These three things-stock selection, capital allocation and psychological quality.

Therefore, I can tell you with certainty that as long as you learn to choose good stocks, make good asset allocation, and cultivate the psychological quality that is not affected by the market, and do these three most important things well, you can become a winner in long-term investment market.

The key to creating good performance all year round: choosing the right stocks + a suitable capital allocation strategy

The first is stock selection. When we adopt an active stock selection strategy, we must first learn to choose good stocks, especially growth stock investors. The stock selection ability will directly reflect your investment performance.

The scope of stock selection is very wide, from how to select potential stocks, using stock selection formulas to calculate a reasonable entry price, qualitative analysis of growth stocks, to when to take profits and stop losses... etc., are all included in the stock selection strategy Within range.

But in addition to choosing the right stocks, it is equally important to find the right capital allocation, because if you choose the right stocks without matching the right shareholding ratio, you will often not be able to effectively amplify profits. For growth stock investors, Choosing a concentrated shareholding is the only way to accelerate profit growth.

Although holding a basket of stocks cannot create high returns, too concentrated holdings or excessive use of financial leverage will expose yourself to a high degree of risk. Therefore, it is a science to determine the number of holdings and the proportion of capital allocation.

Many investors focus on stock selection, but ignore the importance of capital allocation. Even the stock god Buffett can’t make a profit every time he makes a shot, and occasionally he may misunderstand him, but he can’t ruin the profits accumulated over the past few years because of one mistake. I’ve seen many stock picks in these years. Well-qualified investors fall short because of overconfidence.

To put it simply, a good allocation of funds can allow you to amplify profits in the long market, and then when the short market comes, you can reduce your investment losses. If it accumulates for a long time, the investment performance will naturally lead the market.

Establish correct investment concepts, cultivate strong psychological quality

In addition to knowing how to choose stocks and do a good job of capital control, the last is psychological quality. If you want to become a winning army in the market, the most important thing is to cultivate strong psychological qualities, but based on my long-term observations in the stock market, this is indeed the biggest cover for ordinary investors.

Many investors quickly accumulate a lot of profits in the long market or when there is a tailwind, but once the short market collapses sharply, or the market and individual stocks do not move as expected, panic will spread because they cannot bear the book loss. And forget about the investment concepts that were built up hard in the past, and take the opposite action.

There are also many investors who, because of the optimistic atmosphere of the market, watch the stocks continue to rise, and cannot bear the temptation to make money quickly, regardless of the stock price has been far away from the value, they will put all their funds into their brains, but the result will be at the highest point.

The first step in cultivating a strong psychological quality is to understand your own personality. Everyone’s innate conditions are different. Some people are calm and calm, some are enthusiastic and impulsive, and they react to investment. The result will be very different. Therefore, investment The first thing a person has to do is to understand his own personality and first learn the ability to manage his own emotions.

The next step is to construct a logical investment concept. We don’t need to rush out of holdings because we have facts that other people don’t know. When you are very sure that the current decline is only short-lived, you will not be caught in the panic atmosphere of the market. Affected, and make wrong judgments.

All investors are afraid of losing money, and I am no exception. The stocks go up and down. If you follow other investors in the market and dance, it will eventually be difficult to get the fate of being cut leek. We only dare to buy stocks during a sharp decline, relying on investment knowledge and logic, because as long as the company's profits continue to grow, the stock price will naturally continue to rise, and a strong psychological quality is entirely based on the correct investment concept.

Having a good stock selection ability and not having the right capital allocation will often make you fall short. Having the right capital allocation but without good psychological quality will not allow you to stay on the investment road for a long time. Stock selection, capital allocation, and psychological quality are interrelated. The lack of any one of them will destroy your investment plan. For investors who want to pursue the freedom of wealth, you must learn invest in the 5 most important things.

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