- A deep knowledge of the stock market
“If money is your hope for independence you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability” – Henry Ford
Stock investment generally carries a high degree of associated risks, but investing in a short term stock market has an unprecedented level of associated risks, it is more or less a gamble. In order to gamble right, you must have adequate knowledge of what you are doing. Short term trading is not for mediocres or beginners, it is a very volatile market and should be reserved for experts; even experts make unpardonable and unrecoverable mistakes.
- Market timing
Buy low; sell high is the word here. If you are to make profit in any business venture – which is the reason to be in business after all, you must sell your products higher than you bought them. You have to properly time the market by constantly monitoring the market trend. Guess work is completely ineffective when it comes to investing in the stock market. Good intuition and solid decision making come from learning about global and local news, both politically and economically. When you watch the news, make sure to keep track of the industry your company is in. Even stable companies may go bankrupt or have a major blow that may bring them down. Sell too early; you lose out on the potential gains, sell too late; you lose your investment capital.
- Diversify your stocks
“We can no longer let the threat of an early frost send a chill of fear throughout a large portion of our workforce. Diversification is the only answer.” – Alan Autry
Diversification helps shield an investor against losses, by investing in so many categories of business, the risk of losing all your investment should something unexpected happens will be reduced. Also when you spread your stocks, there is a kind of a bailout from stronger companies to your financial goal when the weaker companies aren’t generating enough, and also it affords you the luxury to wait for the market to bounce back whenever there is a bear effect. It is advisable to purchase mutual funds from companies that have already spread their investments. Before buying mutual funds, you must learn about the different the different types of mutual funds and then find a good one to buy.
- Stock brokers aren’t the final word
There are so many stock brokers out there, some are good and honest, and some are good but dishonest, while some are bad in all ramifications. Finding the good ones might prove a herculean task, you should therefore acquire the knowledge needed in stock investment before going to a stock broker and you will be covered, nobody can take away your knowledge and nobody can cheat you easily in what you are familiar with. Most times what they do is to gamble with your money, which is the more reason you should familiarize yourself with the rudiments the stock market before investing in any business.“No thief, however skillful, can rob one of knowledge, and that is why knowledge is the best and safest treasure to acquire” ― L. Frank Baum.
- Don’t be greedy
“The greed of gain has no time or limit to its capaciousness. Its one object is to produce and consume. It has pity neither for beautiful nature nor for living human beings. It is ruthlessly ready without a moment’s hesitation to crush beauty and life” – Rabindranath Tagore
Greed is an intense, excessive and often selfish desire to gain more wealth; power etc. nothing kills a man faster than greed. Greedy investors have an insatiable appetite for stock profits, and because of that, no matter how much they acquire, they will always want more. It is this insatiable quest to gain more that blinds them to the reality of the stock market and makes them to lose all when they should have sold. In Kenny Rogers’ “The Gambler”, a gambler was advised his co- traveler as follows: “You’ve got to know when to hold them; Know when to fold them; Know when to walk away; And know when to run”
