Updated: Feb 2
Don’t Invest Money you Need
If you have money that you intend to use within 2-3 years, put it in a savings account instead of investing in the stock market. If the market crashes, it can take up to a year or more to recover your losses.
Invest for the Long-term
Build for the long-term instead of the short-term. A lot of brokers today rely on new accounts from amateur day-traders to make commission fees or sell your order flows to intermediaries. The more you trade, the more they benefit - regardless of whether or not you're making profitable trades.
In the long-run you are much more likely to succeed, especially if you are investing in mid to large cap companies or ETFs. When you buy a security or stock, expect to hold it for 1, 5 or 10 years. Seasoned investors know one thing above all: time is on your side, not much else is.
Learn About Different Valuation Methods
So you saw a headline about Bitcoin skyrocketing or Tesla's share price increasing rapidly. Is this sufficient information for you to invest? The market is not a casino where you try to get lucky. Learn how to calculate a company's enterprise value, profitability ratios and the growth of the industry. Take a corporate finance course to understand what free cashflows are and how that information can be used to determine a realistic valuation for the company. Based on your findings and how the asset is currently valued in the market, make an informed decision.
Build a Diverse Portfolio
Diversification is important to balance out your risk profile. We recommend building a portfolio of at least 10 securities and a maximum of 50. We recommend investing no more than 10% of your portfolio in one stock or 20% in an ETF.
Pay Attention to Trends & New Strategies
While it's important to develop a strategy, it's equally important to pay attention to trends in the market and to capitalize on them. It's not always about buying low and selling high. You can also buy high and sell higher!
Forget "Get Rich Quick" Schemes
Whether it's someone trying to recruit you into a forex/crypto multi-level marketing scheme or guaranteeing high returns by trading derivative products such as options, be very careful with who you trust with your money. Stick to methods which have a long track record and have been proven to work over and over again. Those who get rich overnight, tend to also lose their money very quickly - easy money doesn't last long. Aim to build wealth gradually over time and you are a lot more likely to succeed.
Practice Makes Perfect
This rule is applicable to every aspect of life, and it's no different when it comes to investing. Before throwing your life savings into a trading account without understanding how things work, take the time to open a practice account where you trade simulated money based on the actual market. We recommend doing this for a minimum of two years. In the meantime, put your savings into a large index fund where it'll remain relatively safe until you learn the ropes.
Leave Your Emotions Out of it
Don't get emotions mixed up with your strategy. Trying to time the market doesn't work the majority of the time. Stick with your long-term vision and don't get caught up with dips and market corrections along the way. Contribute to your portfolio regularly to take advantage of dollar-cost averaging and trust the process that's worked for over 100 years.