Fundamentals To Make Money From
First Step Towards Getting Rich
16th Sept 2012
Investment in the stock market is one of the best way to making money and getting
rich. At the same time, it has to be emphasized that to make money from stock always has some risks
involved. And like any other investment activities, these risks can always be minimized .
This is also a path always taken religiously by the rich, many of them are
investment legends who reap successes after successes in stock market trading.
It is thus pretty obvious, to ignore is to live dangerously at one’s own
peril in stock market trading. You should and can avoid getting your hands burnt!
Some of the practices these investment legends stick to and what many of us can copy and jump start our
endeavor to strike riches in our life are :
1. Have A Clear Goal and
This is one of the first and most common mistake among the investors, i.e
not having a clear goal and strategy. Overlooking the difference in characteristics, investors tend to mix up
investment stock with trading stock .These two types of stocks should be treated
separately when establishing your investment strategy.
Generally, trading stocks are purchased depending on rumor or predictions.
A trading stock is a short term investment and needs to be monitored closely for buy and sell
Investment-grade stocks are purchased or sold after reviewing the business
fundamentals which include the stock potential, growth prospects, earning outlook etc.
When investors get mixed up with these two types of stock , they can end
up with a low grade stock knowingly with an intention to make some quick gains. But they treat it as an
investment-grade stock by holding on for a long period once the stock comes to a loss position. Instead of cutting
losses, they hold it longer than necessary and expose themselves to more uncertainty further down the
Similarly, after evaluating fundamentals or dividends, some investors
initially go for investment-grade stock with a view to make a long term investment. But panic sets in when the
price swing down a bit due to some irrelevant market noise. They make a quick exit selling out the stock for fear
that the price may slide down further. In this case, they thought the have cut losses not knowing they have
actually missed the opportunity to make the gain they can hit in future based on their study earlier.
Having a clear goal and strategy at the very beginning helps you stay
focus and act rationally but differently for short term speculation and long term investment. This is one secret
the rich preach to optimize their investment returns.
2. Patience And Focus
Patience is vital when you are holding investment grade stocks. Returns
are normally lower but steady over the years. They need minimal monitoring for getting the best outcome.
Impatience and throwing out your investment grade stocks early result in
you not getting the best out of your long term investment. At the same time, it
also distracts you from monitoring your short term speculative trading stocks.
If things do go wrong, it is going to be a double whammy.
3. Long Term Profit Vision
Long term profit expectation should stay in focus to be
harvested at its expected time. Any hurry in taking profit by disposing your money-making stocks instead of the
loss-making stocks will result in building a portfolio of low quality stocks with high risks in the end. This
basket of ‘rubbish’ is not going to support your financial needs at a time when you need it most !
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