Investing in stocks is a journey that starts with knowing yourself. It continues with evergreen curiosity.
Both benefit your portfolio.
Here are 10 simple tactics that will make you a better investor:
Figure out what you believe in.
• Learn voraciously about those sectors/industries/stocks.
• Read/listen/watch as much info as you can, given your schedule & life.
Since you are already interested, it will feel natural.
This will open the door to a key decision.
Once you know, only invest in what you truly believe in.
This will be the backbone of your thesis. Institutional investors have one, and you should too.
You can only have conviction if you wholeheartedly believe.
You may have heard this before…
Take as much risk as you can, considering where you are in life, for a high potential reward.
The younger you are, the riskier your strategy can be.
The more financially secure you are, the same.
Note that riskier doesn’t mean reckless.
I’ll come back to risk in a second.
Keep records of your trades, both the good and the bad.
Memory tends to be biased.
• Why did you invest?
• Why didn’t you?
• Why did you sell? and so on.
We have talked about this before
If you have an impression about a stock but cannot act on it, make a note and set up an alert.
When it triggers, find out whether you were right.
This will build up your confidence, or point out areas to improve.
That’s why we keep watchlists.
But don’t stop there…
Study all those records.
Learn from your investing mistakes and your wins.
This will open the door (hopefully, if you’re truly doing it) to new mistakes.
Experience (and conviction) is built this way.
When circumstances change, and you no longer believe in the stock, get out.
Emotion can keep you around way longer than wise and can hurt your investments.
Also, blind faith is only for church!
Use leverage if you must, but be extremely careful.
Consider specific actions to protect your downside:
• settting up conditional trades
• hedging in a way that makes sense to you
• use options (or warrants if available to you)
• get into futures, such as copper or silver
Diversify in uncorrelated assets/stocks to de-risk your portfolio.
• Unrelated sectors (e.g. mining & tech)
• Art, collectibles
You can also look into beta for each stock.
But don’t over-diversify, as that will dilute your returns.
Lastly, figure out your ideal ratio between available capital & position size.
Seek a meaningful number of shares that gives you enough exposure to the upside.
Being right with way too little can be as demotivating as losing.
And psychology is a big part of investing.
And that’s 10.
• Know yourself
• Create your thesis
• Risk can be OK
• Keep records
• Use reminders
• Study results
• Leave if required
• Leverage w/caution
• Uncorrelated helps
• Position size is key
If you enjoy my content for investors and are ready for more, start here: