Do you plan to be a long-term investor? The following principles can help you succeed in your plans:
- Don’t chase a hot tip. Let your own research and analysis guide your stock purchases, not someone else’s.
- Sell the losers, and let the winners ride. Let losers go before their value completely plummets but note that it is actually difficulty to know which suffering stock will turn around and which ones won’t.
- Don’t over emphasize the P/E ratio, which compares a company’s share price to its earnings per share. It should be within the proper context, and in conjunction with other analytical processes.
- Short term movements should not prompt panic because short-term volatility is inevitable. A quality investment will persevere.
- Resist the lure of penny stocks. A lousy $8 company has just as much risk as a lousy $ 100 company. Remember, companies with lower share prices face fewer regulations.
- Pick a strategy and stick with it.
- Focus on the future. Base decisions on potential rather than the past.
- Be open-minded. Many good investments are not household names. But many of them have the potential to turn to blue chips.
- Adopt a long-term perspective. Embracing the long-term horizon and diminishing “the get in, get out and make a killing” mentality.
- Lastly keep taxes in mind. Although investors should try to minimize tax impacts, it’s rare to find tax considerations dictating investment decisions.