Every day the stock market tempts me to be a gambler and not an investor. Each day that I become a better investor, I am tempted to throw it all away for some risky trade. Becoming successful in the Stock Market is never something that is easily accomplished, and one of the main reasons is because it is just too easy to get caught up in the quest for fast and easy money. You make a few good investments, and just like that you feel like you are ready to take on some of the more riskier positions. The irony of it is that you built up most of your gains and confidence through conservative investments. So why would it make sense to go against what is working for you?

The answer is it makes no sense at all, but it sure does sound tempting! Who wouldn’t want to start investing more aggressively when they see that they are successful and profitable? It seems like a good enough idea, but in reality it’s just asking for trouble. It is crucial that you stick to your rules for investing success (you do have a set of rules to invest by, don’t you?), otherwise you are just increasing your risk for losses to your portfolio. This is easier said than done, especially in a market that is exploding with volatility. So here is a list of things to remind yourself when the temptation becomes unbearable:

1. You are going against what has been working for you
2. You are increasing your risk
3. Are the potential profits so desirable that you need to ignore your own rules for long term investing?
4. Has more aggressive investing worked for you in the past?

Remember that as an investor, your chances for success over the long term are significantly higher when you take on a conservative strategy. Avoiding the risky moves for your overall portfolio will be your ticket to long term success. This doesn’t mean you need to have your entire portfolio consist of boring low risk, low reward stocks, but it does mean that the majority of your portfolio should be positioned so that you can weather any financial disaster that could happen in the stock market.

Every investor needs a self created list of rules to invest by so that they stay disciplined and successful. Many investors learn the hard way what the do’s and don’t’s of the stock market are, but fail to write them down so that they don’t repeat these mistakes over the course of their investing career. You need to make a list of rules to invest by yourself, and this article will show you how to do that.

But before we get into the process of creating a list of rules, you may be asking yourself “why do I need to make the list on my own?”. No, it’s not because I’m too lazy to give you a specific rule list, it’s because each investor has their own strategies, goals, and styles that make them different. So a list of rules that might work for one investor might be terrible for another. With a list of rules to invest by created by yourself, you can use your own experience to identify what works and doesn’t work for you. If you have no experience in the stock market, scroll down to the section titled “My own rules” to see my personal set of rules for investing to give yourself an idea of where to start when creating your rules.

Creating Your List of Investing Rules

Creating the Do’s…

Think of all the investments you made this year that were both rational and successful. What similarities did these investments have in common? Try to isolate these similarities and find ways that they can be made into rules. For example, if you made several investments in stocks with good fundamentals and they were all successful, a good rule to create would be “only invest in stocks with good fundamentals”. Your list of “Do’s” should consist of rules that will always be a good foundation for choosing stocks to invest in.

Creating the Don’t’s…

Now think of all the investments you made this year that were unsuccessful and/or irrational. Think about what made these stocks poor investment choices and what was ultimately wrong with them. As an example, suppose you invested in a stock just because you heard about it from some market analyst on television and invested solely by that analyst’s advice. So your rule would be to “never invest by analyst opinion alone”. Opposite to the list of “Do’s”, your “Don’t’s” list should consist of rules that contain all of the wrong reasons to invest in stock.

Remember: You don’t need a list of investing rules that is longer than most fictional novels. Keep it simple and stick to the universal rules that will make you a successful and rational investor.

My Own Rules

Do…

1. Invest in stocks with strong fundamentals
2. Stay up to date with the stock market on a daily basis
3. Do research on a stock before buying/shorting it
4. Diversify your portfolio
5. Sell some shares on a high performing stock that may have peaked
6. Stay unemotional under all circumstances

Don’t…

1. Go by your gut feeling
2. Let momentum be the only reason for investing
3. Attempt to trade market volatility
4. Rely on analysts’ opinion alone
5. Let the fear of failure become an obstacle

Oh, and the golden rule for investing: Buy low, sell high.

Many if not all of the blog sites in the stock market niche are more than happy to offer you with their opinions and stock picks for your portfolio. This is something The Investor’s Journal does not and will not ever offer. Some might see this as a disadvantage for the website, but to me it’s just not worth the hassle. The goal of this website is to teach you how to invest, not to tell you what you should invest in. I want you to learn how to invest so that you can free yourself from relying on others to help you grow your portfolio. Why is that? Because no one cares about your money like you do!

Aside from that, there are some other significant issues I have with providing stock picks:

Legal issues
I’m not a laywer and I’ve never studied law, but I know that providing stock picks is just asking for legal issues that I don’t have time to deal with. This site is just a hobby for me, it’s not my main source of income, so it’s just not worth the hassle for me.

I change my mind often
Even though I consider myself as a successful investor, I am willing to admit that I can be wrong often. When the market reaches pivotal points where it could rally or plummet, I often change my mind on my feelings towards our short term future in the stock market. It would be incredibly time consuming and confusing to my readers if for example one day they read an article where I explain why I feel like the stock market is poised for a correction, and then the next day I write another article dismissing the former while giving more well thought reasons for my beliefs.

Psychological Reasons
One thing that’s rough for stock market analysts is that you are expected to never be wrong. People look up to you and expect that with your higher knowledge you are somehow infallible. This just isn’t the case. In some cases, analysts who make bold predictions that never come into fruition begin to go into denial. In these cases analysts attempt more than ever to convince people that their original prediction is simply ahead of the market, when in reality it just isn’t going to happen. These analysts go through depression, embarrassment, and all kinds of emotions because of the disappointment and disapproval the readers show for that analyst. As I said before, this site is just a hobby of mine, investing is my main source of income, and the last thing I need is stress from my stock picks leading to me becoming an irrational or emotional investor.

Investing is all about managing risk, reward, and choosing the best locations to grow your money. Sometimes in the path towards successful investing you encounter a few speed bumps that hinder your performance. Other times, you run into a hurdle that knocks you flat on your ass. Significant losses to your portfolio are something every investor experiences atleast once, but not every investor recovers from. If you plan to be a successful investor, you need to learn to cope with these losses so that you can be able to recover and revive your underperforming portfolio. Here are ways you can cope with significant money losses in your portfolio:

Take Time Off
It will be very helpful for you to stay away from the market, if only for a day. Try and enjoy yourself without focusing about the big hit you just took. Pretend as if it didn’t even happen, and simply enjoy your day. If you need more time away from investing, take as long as you need. Your goal is to take your mind off your losses so that when you get back into investing, you return with a refreshed, rational, and positive state of mind.

Don’t Feel Discouraged
Despite how devastating a significant money loss can be, you cannot become discouraged from investing. You must intend to return so you can achieve your original investing goals. Investing isn’t easy, and if you want to be successful you need to be committed to it. Use the finish line goal as your motivation and disregard the current hurdles in your path. Even the most successful investors and traders have taken significant losses, so don’t feel like it’s a personal failure.

Consider it a Right Of Passage
As I said, everyone eventually takes a big hit in the stock market. Veteran investors know the pain of major losses, and they know it well. The consolation is that dealing with the emotional pain/discouragement will get easier as time goes on. You will be more experienced, and if you are unfortunate enough to receive another significant hit to your portfolio, you’ll be better prepared to cope with those losses.

Appreciate the Lessons You Learned
You always learn a great degree of knowledge from your mistakes. Take the time to appreciate the lessons you learned when you took a significant money loss. Make sure you realize what those lessons are, so you are sure not to repeat those same mistakes. For some investors, they use these lessons to build a list of rules for successful investing (going against the rules means risking a significant portfolio hit).

I just watched the movie “The Secret”, and my oh my was I disappointed in both the creators and the supporters of this movie. The movie basically takes the simple concept of “stay positive, be passionate about what you desire, and apply yourself to find ways to achieve your desires” and drags it out into a ridiculously long movie that claims all you need to do is wish for something and it will come true. No further detail went into explaining how this miraculous event occurs, instead they just gave ludicrous examples of “the secret” in action.

I couldn’t be more saddened by the fact that some people believe this is true. Sure, wishing and hoping for something is one step towards achieving a goal, but it’s just a single baby step towards reaching that goal. If you really want something, you need to commit yourself to it. Wishful thinking alone is for bums. Being positive and hoping for a better tomorrow certainly doesn’t hurt your circumstances, but actually applying yourself and thinking of ways to reach your goals is a much better plan.

I think of how many products and services surround our society that promise amazing results with little to no effort required. It’s just sad to know there is always a sucker out there willing to hand over their money in return for false hope. Especially when it comes to investing. The Investing industry is full of lies, with scam artists hoping they can convince you that they have the secret for profitable investing. Too many discouraged, ignorant, or foolish investors keep these useless companies in business by believing their lies and purchasing their product or service.

Well, I’m here to say one thing: There is no easy path. The average individual needs to wake up and realize that success is achieved through becoming knowledgeable, working intelligently and diligently, staying committed, staying positive, and believing in yourself. Wishful thinking alone will take you nowhere, especially in the stock market. The sooner you realize this, the quicker you can move on to the proper ways of learning how to achieve your goals.

Emotions are the handicap of the novice investor. They hinder your rational thought process and increase your chance of failure. So it should be obvious that you’ll need to ignore your emotions if you ever want to make a profit while investing. Here are some quick ways you can become as cold as ice and invest emotion-free.

1. No Wishful Thinking
There is no stock genie granting magical wishes. If your stock is performing poorly, you need to get straight to the point and ask yourself why you are still invested in your stock. If your answer is anything other than “I know for certain that the market is valuing it incorrectly”, then you are just doing wishful thinking.

2. Take a Time Out
If you feel like you aren’t certain what you should do with a stock, and that perhaps you are becoming emotional, then you need to take a time out. Step away from your desk, try and go to a quiet place, and remind yourself why you are investing in your stock. If your explanation sounds rational to you, then you know you are invested properly. Use this to boost your confidence anytime you doubt yourself or become emotional.

3. No Playing Favorites
It’s easy to grow fond of a stock that has made you a good profit (or still is making you profits). While it’s okay to be a supporter of the company the stock represents, it’s not okay to blindly put your money into it hoping their past performance will continue. Always remember that you invest in stocks to make money, and nothing more.

4. Don’t Obsess Over Daily Fluctuations
If you are investing and not trading, you need to realize that your stock’s price will fluctuate every day. This is normal, and it shouldn’t change any of your beliefs on where the stock is headed, unless there is a significant change that occurs within the stock.

5. It’s Just Money, Get Over It
This might seem crazy to some, but you should always remember that in the end it’s just money. If you obsess over your profits and losses, you’ll be investing with a clouded mind. Part of being an unemotional investor is accepting the fact that you will sometimes lose money. As long as you pick yourself back up and head right back with a rational thought process, you’ll almost always come out profitable.

Rich Dad, Poor Dad by Robert T. Kiyosaki

Rating: 5/5, A must read book

Investor, businessman, motivational speaker, and author Robert Kiyosaki wrote an instant classic with his book “Rich Dad, Poor Dad”. In it, Kiyosaki describes the unique difference in perspectives between his poor father and his best friend’s rich father. The book explains why the average middle class person is usually financially troubled even if they are highly educated and work hard, driving home the idea that the poor work for their money, while the rich make their money work for them. Kiyosaki goes on to explain why it is so important to build assets and get rid of your liabilities.

Many people are quick to argue that the book’s failings are in that it doesn’t give specific applications to build your wealth. However, I think the people who argue this missed the entire point of the book. Kiyosaki’s intention for the book wasn’t for it to be a literal guide to building wealth, but rather to inspire you to find your own means of building wealth. Kiyosaki constantly reiterates thoughout his book that you should always attempt to find new ways to accumulate assets that will make you money.

I found the book to be very inspiring and enlightening. The book was slightly repititive, but I believe that was done intentionally so the author’s message would stick with his readers. I highly recommend reading, if not purchasing this book. It also makes a good gift for anyone you think needs financial guidance.

Every investor has their own strategies, methods, and techniques to achieving success. Though despite these differences, all successful investors share the same distinct traits which truly separate them from the herd. The five traits of a successful investor are:

Highly disciplined and committed

Discipline is the backbone of a successful investor. Being highly disciplined means you are committed to your efforts so that you are always prepared. If you want to be successful in the stock market, you need to commit to it. There is no such thing as a free lunch. Successful investors don’t let the hurdles such as previous investing failures get in their way, and neither should you. If you know how to invest properly, discipline and commitment will ultimately be your gateway to success.

Invests without emotion

Emotions are the handicap of the novice investor. Successful investors know that rational investing is fundamental, so they disregard their emotions while analyzing their investments positions, decisions, and ideas. If emotions are thrown into consideration while investing, the thought process of a rational investor becomes clouded and often leads to failure.

Always up to date with the market

A funny thing about the stock market is that everybody has the same information, but everybody interprets it differently. Successful investors are always up to date about the current market by using unbiased financial media sources to get their information. The stock market is full of variables that can drastically influence market prices, so staying on top of those variables is crucial.

Possesses a realistic outlook on investing

Having a realistic outlook on investing and success coincides with being highly disciplined and committed. Successful investors understand that they probably will not become the next Warren Buffet, by which I mean they won’t make astronomical returns on their investments. However, humble expectations often lead to high returns, as an investor without excessive greed will have a clear state of mind and will invest properly.

Always has a plan

Not having a plan while you invest is like a coach telling his players “Just go out there and win”. Sure, if you’re lucky and/or naturally talented enough, you might make a few successful investments, but this plan (or lack of) hardly is effective in the long term. Successful investors understand the importance of having a plan. They know where they want to get in, where they want to get out, what they will do if something changes or goes wrong, and what their goals ultimately are. Having a plan keeps an investor focused so that they will stay rational while they invest.