10 Principles for Stock Market Investments

Howdy,

Lately, I have been asked more and more often if this is a good time to invest in the stock market. My classic answer to this question is that the best time was: yesterday (when there was a crisis and everyone was desperate).

As yesterday has already passed, the next best time to start investing in the stock market is today, but only after you have reached these milestones.

Given that we are on an upward trend that has been going on for over 10 years (with a short break in 2020), I recommend caution. You can start with a smaller amount to learn the back mechanisms and to learn to control your emotions during the process.

By no means do I want to convey that I recommend for the mother be inactive at this time. I don’t think it’s a good time to invest a large amount of money at once in the stock market, and I wouldn’t recommend a beginner invest a lot of money from the beginning.

To help you, I will give you a series of investment principles that I also use and that have brought me long-term results.

Principles of stock market investments

1. If you do not intend to become a professional trader, invest in the medium and long term;

2. Don’t buy shares, buy the companies behind the shares;

3. The market is constantly oscillating between unsustainable optimism (the price is exaggeratedly high compared to the real value of the company) and unjustified pessimism (the share price is much too low compared to the real value of the company). The key is for you to buy in times of unwarranted pessimism;

4. Controlling emotions is much more important in the stock market than financial knowledge;

5. Do not consider the predictions of brokerage houses to be reliable. Most of the time these predictions do not come true;

6. Once everyone has identified a growing industry, company, or technology, it is already too expensive to buy consistently (to be all in);

7. Protect your equity investments against large losses through constant, monthly, and diversified investments. Don’t be frightened by small price changes. These are normal;

8. Don’t trade too often (over trading) because you end up losing your money on brokers’ commissions;

9. The future value of any investment depends very much on the current price. Buy at a discount price to resell later at a fair price (at least). Profit is made by buying, not selling.

10. If you do not have a solid knowledge of investing, the most effective way to invest in the stock market (and with better results than 90% of investors) is through index funds or ETFs on the stock market index. These are funds that comprise a basket of shares representative of a particular market. In Romania, there is one such ETF listed on the stock exchange: ETF BET Tradeville. Internationally, there are thousands of such ETFs in almost any market, region, asset class, sector, etc.

Conclusions

The truth is that only with bank interest and monetary investments will you never become financially independent. Financial independence is almost always achieved through one’s own business, real estate investments, or the stock market and, often, through a combination of the three.

Of all the three types of investments, stock market investments require the lowest start-up capital (somewhere between 1000$ and 5000$ ) and have the greatest flexibility in terms of ease of entry and exit from the market. From this point of view, the scholarship is the ideal tool to start putting your money to work.

Remember that when you invest in the stock market and buy a stock, you are buying a piece of a complex and well-developed business and preferably profitable. You have the opportunity to benefit from this well-developed system by organically increasing the value of the company or by the dividends it pays.

In the end, I want you to act with confidence, caution, and patience, and the results will not belong in coming.