If you want to make consistent money in the stock market, you can't afford to play it by ear. You have to have a game plan, and you have to be in it for the long haul. If what you're looking for is shortcuts to make a quick buck in the stock market, this is not the article you need to be reading. With this out of the way, let's move on to the ten steps to consistently making money in the stock market.
1. Set your goal. Take your personal factors into consideration to come up with the type of portfolio that best suits you. Then analyze every potential investment by thinking about what you want out of it and whether or not it fits into your overall investment plan. Just like a sports coach, have your X's and O's ready, don't react to the market. This will save you a lot of headaches and money.
2. Come up with a strategy. Stock market investing tactics and strategies are a dime a dozen. Any Google search or trip to your local library or bookstore will present you with a dizzying array of choices. Faced with such a wide range of options, you're better off deciding on one strategy that you're most comfortable with and that fits your style, and going with it. Leave yourself open to the possibility of making a minor change here and there but have those changes be the exception rather than the norm.
3. Assess possible risks. Your ability to assess the risks your investment carries will be critical to your success. The key here is to look at them realistically, not with wishful thinking. Your management plan must be as effective and practical as possible in order to minimize your losses and in turn maximize your profits. This step is to be completed BEFORE evaluating profit potential, to avoid you getting so excited about your potential profits that you fail to properly evaluate the risk you'll be taking.
4. Think about profit potential. One of the hardest parts about investing is knowing when to cash out once you're riding a winner. You should have a set threshold where you sell off enough to at least recoup your initial investment, and then ride the profits as long as you can. Know when and how to get out.
5. Study possible alternatives. A little extra homework might unearth other investments that carry fewer risks or a better profit potential; or maybe there is another strategy that will make things simpler for you (and hopefully bring you a little more money in the process).
6. Scale the mountain. This step goes hand in hand with devising a strategy from the get-go. Every investment you make will have its unique challenges to optimize rewards and minimize losses. Anticipating them gives you a leg up that will allow you to achieve that exact goal.
7. Draw up your plan B. Your plan B should dictate what you do when things don't go exactly as planned (in either direction). You shouldn't have to be deciding on the fly when it's time to get out of an investment, it should all be laid out and you should be responding to certain criteria, not to panic or elation. This helps you avoid losing on potential returns or better yet, helps you avoid losing more money than you've already sunken in a losing investment.
8. Choose correctly. You should be aware that investing is not exactly something that you can pursue offhandedly. So before you take the big leap and put your money in the market, you'd be well-inspired to take a step back and analyze your investing project in its entirety. You should be able to see the big picture as opposed to bits and pieces here and there. If it doesn't hold up, or doesn't show that it's worth your efforts, don't hesitate to scratch it: you'll be better off starting a new plan from scratch than losing on a big gamble.
9. Reach for the stars. After you've made the decision to put money into such and such investment, it's time to stop over-analyzing and start taking action. As it turns out, even if you picked the absolute worse investment, you won't have lost everything you own because you did your homework and set limits to your losses. Your game plan, as long as it is sound, will produce solid returns in the long run if you stick to it.
10. Debrief. At least twice a year, take a look at your plan and how you've fared in your investments. If somehow you bombed and lost a lot of money, try to figure out what went wrong so that those mistakes don't keep on dogging your investing efforts. Above all, don't give up; if you do, then you won't have any lessons to draw from those mistakes. Keep tweaking things until you find your personal success formula. Once you've cleared that hurdle, you're set. - 15224
1. Set your goal. Take your personal factors into consideration to come up with the type of portfolio that best suits you. Then analyze every potential investment by thinking about what you want out of it and whether or not it fits into your overall investment plan. Just like a sports coach, have your X's and O's ready, don't react to the market. This will save you a lot of headaches and money.
2. Come up with a strategy. Stock market investing tactics and strategies are a dime a dozen. Any Google search or trip to your local library or bookstore will present you with a dizzying array of choices. Faced with such a wide range of options, you're better off deciding on one strategy that you're most comfortable with and that fits your style, and going with it. Leave yourself open to the possibility of making a minor change here and there but have those changes be the exception rather than the norm.
3. Assess possible risks. Your ability to assess the risks your investment carries will be critical to your success. The key here is to look at them realistically, not with wishful thinking. Your management plan must be as effective and practical as possible in order to minimize your losses and in turn maximize your profits. This step is to be completed BEFORE evaluating profit potential, to avoid you getting so excited about your potential profits that you fail to properly evaluate the risk you'll be taking.
4. Think about profit potential. One of the hardest parts about investing is knowing when to cash out once you're riding a winner. You should have a set threshold where you sell off enough to at least recoup your initial investment, and then ride the profits as long as you can. Know when and how to get out.
5. Study possible alternatives. A little extra homework might unearth other investments that carry fewer risks or a better profit potential; or maybe there is another strategy that will make things simpler for you (and hopefully bring you a little more money in the process).
6. Scale the mountain. This step goes hand in hand with devising a strategy from the get-go. Every investment you make will have its unique challenges to optimize rewards and minimize losses. Anticipating them gives you a leg up that will allow you to achieve that exact goal.
7. Draw up your plan B. Your plan B should dictate what you do when things don't go exactly as planned (in either direction). You shouldn't have to be deciding on the fly when it's time to get out of an investment, it should all be laid out and you should be responding to certain criteria, not to panic or elation. This helps you avoid losing on potential returns or better yet, helps you avoid losing more money than you've already sunken in a losing investment.
8. Choose correctly. You should be aware that investing is not exactly something that you can pursue offhandedly. So before you take the big leap and put your money in the market, you'd be well-inspired to take a step back and analyze your investing project in its entirety. You should be able to see the big picture as opposed to bits and pieces here and there. If it doesn't hold up, or doesn't show that it's worth your efforts, don't hesitate to scratch it: you'll be better off starting a new plan from scratch than losing on a big gamble.
9. Reach for the stars. After you've made the decision to put money into such and such investment, it's time to stop over-analyzing and start taking action. As it turns out, even if you picked the absolute worse investment, you won't have lost everything you own because you did your homework and set limits to your losses. Your game plan, as long as it is sound, will produce solid returns in the long run if you stick to it.
10. Debrief. At least twice a year, take a look at your plan and how you've fared in your investments. If somehow you bombed and lost a lot of money, try to figure out what went wrong so that those mistakes don't keep on dogging your investing efforts. Above all, don't give up; if you do, then you won't have any lessons to draw from those mistakes. Keep tweaking things until you find your personal success formula. Once you've cleared that hurdle, you're set. - 15224
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Before you invest, make sure you read our extensive stock market success article. You can also find more helpful finance advice on our personal finance blog, Money Galaxy.
