After a couple of weeks going around in rural and beach environments, and for a few days focusing on my investments, I'm back to keep going with the blog. The truth is that this year I had not planned to take vacations, but we left a couple of days with my partner and we extended it on the march until they became two full weeks.
Well, today I want to take advantage of the fact that in the last week I spent several days reviewing my investments to talk about what I consider to be 5 essential steps to invest successfully.
Notice that I am talking about looking for business, not just actions . Remember that if you want to reduce the risk of losing your money in the stock market while you get a good return in exchange for this, you must give your investments a business approach.
Therefore, in this first step you should focus on looking for the businesses that are behind the names of the shares instead of just looking at your ticker, price history or purchase recommendation proposed by the analyst on duty.
To find them, you can look at financial portals, specialized search engines or directly enter the web pages of companies that you already know.
This means looking at your web pages, understanding what they do, what sector they operate in and what business lines they have. It also means opening your financial statements to see if they win or lose money, if they have a solid financial structure and try to predict, to the greatest extent possible, if they will continue to make money in the coming years.
The final goal of this step is to identify, among all the lots of businesses listed on the Stock Exchanges around the world, those that are of higher quality and that will earn you more money risking less.
Oh, by the way, do not be discouraged if for every 20 or 30 businesses that you analyze you find only one of great quality, because although in absolute terms they abound, in relative terms they are few.
Regardless of whether you follow a dividend investment strategy, are an investor in pure value or are attracted to high growth companies, having a good pre-portfolio of well-analyzed in-depth business will allow you to quickly detect good investment opportunities when the rest of the market scare for no reason.
In addition, even if you prefer to have the portfolio concentrated in a few different businesses, I think the pre-portfolio can be much broader, since it is simply businesses that will compete among themselves to see which ones deserve your precious money and a position in your final portfolio.
For this reason, the fourth step is to wait patiently for the madness of others to convert the good business you have in your pre-portfolio into good investments, and this happens when your shares are trading at abnormally low prices. If you want to get higher returns, you must buy quality at a bargain price. How? Does this happen on the Exchange? Yes, and the greater your pre-portfolio, the more likely you are to find situations of this type.
You must remember that the best business in the world can become the worst investment in the world if you pay too high a price, so if you want to prevent your best business from becoming your worst investment , buy shares only when its price is cheap.
Is not it true that in the supermarket you try to buy the offers, choosing that week chicken breast if the burgers are expensive? Well in the stock market you should also choose the company "Y" if that year the company "X" is expensive.
eye! Remember that while you will have something to eat, in the Stock Exchange nobody forces you to buy anything if everything is expensive, just your impatience.
The frequency with which to review them will depend on you . In my opinion, updating your analyzes once a year with the new audited financial statements is a good way to do it, being able to look at related news and press releases every few months to find out about possible changes that may affect the quality of your business.
Investing your money in the stock market can sometimes be a little disconcerting. When you are a beginner you do not know where to start and, when you have been in this exciting world for a while, you really realize everything you still need to learn, so you appreciate every little detail that can help you refine your investment strategy.
For this reason, today I want to remind you, in a single article and in a clear and concrete way, what are the 9 keys that, in my opinion, will make you invest better in the stock market. Without further delay, let's go there!
However, if you want to learn to invest, you should look not only at the price of the shares, but also at the business behind them, which means giving your investments a business focus.
Remember that behind each action and each price there is a company with a business model, workers, products or services and customers who buy them. So, you should not see your actions as green and red lights, but as a right to participate in the future benefits of that company.
To this day, however, I find it impossible to consider a few months as a long term, since for me this is now measured in years. The idea is that if you want to build a heritage that works for you forever, you must invest in the long term, that is, with an indefinite investment term, forever.
Investing in the long term, apart from being a very relaxed activity, involves buying and selling infrequently, which considerably reduces your buying and selling commissions and also allows your money to be multiplied before taxes.
Buying cheap will reduce the risk of your investments while increasing profitability, so remember that the best time to buy your shares is in those big downs of the stock that can change your life for the better.
While the value of a stock is determined by the quality of the business behind it, the price of the stock depends to a large extent on the mood of the participants in the stock market .
In the long term the price of a stock tends to coincide fairly accurately with its value , but in the short term it hovers around it , sometimes above, sometimes below.
Therefore, when you pay for a stock a price lower than its value, you are obtaining a margin of safety that helps you to reduce the risk of such investment.
After all, the margin of security is like a mattress that covers you in case the value of your shares decreases due to a permanent deterioration in the quality of your business. In addition, it also covers you against possible calculation errors that you can commit.
And, how do you manage to increase your margin of safety? Well, applying a business approach to buy good business at prices below its value . And, eye! Expanding your safety margin will not only reduce the risk of your investments , but also increase profitability , since you will pay less in exchange for the same dividend and / or the same value.
Remember that if you want to learn to invest better, you must be very clear about the difference between price and value.
I already advance you that it is not easy to go against the majority, but starting from the base of the 90-90-90 statistic that says that most of the people lose money in the Stock Exchange, it is easy to understand that if you want to get results Unlike most, you must do different things, and buying cheap is one of them.
So, when you identify a business that you like, wait patiently for the madness and fear of others to offer you their shares at really low prices, which usually happens in those big drops of the Exchange that change the life to better.
Also, as you have already seen, you must have enough strength to go against the crowd, throwing yourself aside when everyone frantically buys absurd prices and acting with serenity and security to buy when everyone else is terrified.
My recommendation is that you do not do it, since you considerably increase the risk that small movements in the price of your shares force you to close your positions at the worst moment.
Remember that if you want to create and maintain a wealth that will generate income indefinitely, your investment term should also be undefined. Think that sooner or later you will have to pay back your debt, so the term of this does not fit naturally with your investments, even if you renew it.
Believe me, invest to increase your quality of life, your tranquility and your freedom , and borrowing money is not the way to achieve it. I'll tell you more, if you accept borrowed money, it's you who is working for your broker, since this broker is lending it to you in exchange for some interest.
Remember that it is about acquiring assets that work for you, not that you become the asset of another.
And, what are the financial statements? These are the documents where companies publish their balance sheets, their income statements and all the information related to the operation of the business . If now this sounds like Chinese do not worry, because you can learn without studying a career in ADE, economic or similar.
Being able to interpret the financial statements is essential to know in which companies to invest your money, since to make good investments you must buy good companies and get away from the mediocre ones.
I do not know if it will be your case, but if you have been willing to study I do not know how many years to have access to a low-paying job that you do not like, why not study a little in exchange for gaining peace and freedom for life?
I assure you that as you increase your investment level, your results will reflect it and you will gain in quality of life.
So you know, if you want to get the most out of your money to invest better, give a business approach to your investments, invest in the long term , buy your very cheap shares to increase your margin of safety, avoid what is Fashion, think independently, learn the language of business and do not forget to train properly
By incorporating these 9 keys to your investment routine, I am convinced that it will help you invest better to get even closer to your financial goals and your desired life.
Do you use any of these keys in your investment routine? What other keys do you think you can use to invest better in the stock market?
If you want to increase your chances of investing successfully, apart from giving your investments an entrepreneurial approach (yes, I have said it again), you should look for potential businesses in which to invest your money, analyze them to select the highest quality, create your pre-portfolio and wait patiently for them to be on offer . And do not forget to check your business from time to time !
I hope that these 5 steps will give you a mental outline of the day to day of your investment routine so that you can face your investments with the greatest guarantees of success. In the next articles I will go deeper into each of them to talk about more concrete steps, so do not miss any of them.
What are the steps of your investment routine? Which do you think is the most important?
Well, today I want to take advantage of the fact that in the last week I spent several days reviewing my investments to talk about what I consider to be 5 essential steps to invest successfully.
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Step 1: Find potential businesses in which to invest your money
If you want to create a portfolio for your money to work for you and generate income while you dedicate yourself to other things, the first thing you will have to do is look for potential businesses in which to invest your money.Notice that I am talking about looking for business, not just actions . Remember that if you want to reduce the risk of losing your money in the stock market while you get a good return in exchange for this, you must give your investments a business approach.
Therefore, in this first step you should focus on looking for the businesses that are behind the names of the shares instead of just looking at your ticker, price history or purchase recommendation proposed by the analyst on duty.
To find them, you can look at financial portals, specialized search engines or directly enter the web pages of companies that you already know.
Step 2: Analyze the businesses to select the quality ones
Once you have in mind potential business in which to invest your money, the second step is to analyze them , obviously from a business perspective (am I repetitive? Better, that way you will keep this idea well engraved).This means looking at your web pages, understanding what they do, what sector they operate in and what business lines they have. It also means opening your financial statements to see if they win or lose money, if they have a solid financial structure and try to predict, to the greatest extent possible, if they will continue to make money in the coming years.
The final goal of this step is to identify, among all the lots of businesses listed on the Stock Exchanges around the world, those that are of higher quality and that will earn you more money risking less.
Oh, by the way, do not be discouraged if for every 20 or 30 businesses that you analyze you find only one of great quality, because although in absolute terms they abound, in relative terms they are few.
Step 3: Create your pre-portfolio
After analyzing business after business, you can gradually create what I call the "pre-portfolio", that is, the list of businesses that you would like to own. It's about creating your shopping list for the stock market, with your favorite businesses.Regardless of whether you follow a dividend investment strategy, are an investor in pure value or are attracted to high growth companies, having a good pre-portfolio of well-analyzed in-depth business will allow you to quickly detect good investment opportunities when the rest of the market scare for no reason.
In addition, even if you prefer to have the portfolio concentrated in a few different businesses, I think the pre-portfolio can be much broader, since it is simply businesses that will compete among themselves to see which ones deserve your precious money and a position in your final portfolio.
Step 4: Buy only offers
Who said that patience is the mother of science? I do not know, but I assure you that patience is the mother of investment. Try but to be in a hurry to buy the good businesses that you have identified in the previous points without waiting for their prices to be cheap. Well, actually you better not try it, because you either lose money or get a lower or average return.For this reason, the fourth step is to wait patiently for the madness of others to convert the good business you have in your pre-portfolio into good investments, and this happens when your shares are trading at abnormally low prices. If you want to get higher returns, you must buy quality at a bargain price. How? Does this happen on the Exchange? Yes, and the greater your pre-portfolio, the more likely you are to find situations of this type.
You must remember that the best business in the world can become the worst investment in the world if you pay too high a price, so if you want to prevent your best business from becoming your worst investment , buy shares only when its price is cheap.
Is not it true that in the supermarket you try to buy the offers, choosing that week chicken breast if the burgers are expensive? Well in the stock market you should also choose the company "Y" if that year the company "X" is expensive.
eye! Remember that while you will have something to eat, in the Stock Exchange nobody forces you to buy anything if everything is expensive, just your impatience.
Step 5: Review your portfolio and pre-portfolio
The fifth and last great step to invest successfully is to periodically review the business of your portfolio and your pre-portfolio. Notice that I say review the businesses that form them and not the return on your investments at a given time, since what you really want to know is whether they are still of quality, regardless of whether the market puts a price too high or too low at that time.The frequency with which to review them will depend on you . In my opinion, updating your analyzes once a year with the new audited financial statements is a good way to do it, being able to look at related news and press releases every few months to find out about possible changes that may affect the quality of your business.
Investing your money in the stock market can sometimes be a little disconcerting. When you are a beginner you do not know where to start and, when you have been in this exciting world for a while, you really realize everything you still need to learn, so you appreciate every little detail that can help you refine your investment strategy.
For this reason, today I want to remind you, in a single article and in a clear and concrete way, what are the 9 keys that, in my opinion, will make you invest better in the stock market. Without further delay, let's go there!
1) Give your investments a business focus
As you already know, not everything that has to do with the Stock Exchange is investment . In fact, according to my way of seeing it, most people who participate in financial markets do not invest, but speculate. They buy and sell shares, futures, currencies, CFDs or whatever, in a frenetic way and paying attention only to the movements of their prices.However, if you want to learn to invest, you should look not only at the price of the shares, but also at the business behind them, which means giving your investments a business focus.
Remember that behind each action and each price there is a company with a business model, workers, products or services and customers who buy them. So, you should not see your actions as green and red lights, but as a right to participate in the future benefits of that company.
2) Invests in the long term
In my first serious experiences in the Stock Exchange, in the first year of university, I limited myself to buying shares to sell them when they went up in price. Although I did not have a clear strategy and was not aware of the difference between investing and speculating, I did realize that the greatest benefits came from operations that lasted several months.To this day, however, I find it impossible to consider a few months as a long term, since for me this is now measured in years. The idea is that if you want to build a heritage that works for you forever, you must invest in the long term, that is, with an indefinite investment term, forever.
Investing in the long term, apart from being a very relaxed activity, involves buying and selling infrequently, which considerably reduces your buying and selling commissions and also allows your money to be multiplied before taxes.
3) Buy your very cheap shares
The harder your assets work, the more income each of your euros will generate. And, one of the best ways to increase the effort your money makes for you is to buy your shares as cheaply as possible.Buying cheap will reduce the risk of your investments while increasing profitability, so remember that the best time to buy your shares is in those big downs of the stock that can change your life for the better.
4) Increase your safety margin
The margin of safety is a concept presented by the legendary investor Benjamin Graham in 1949. According to Graham, the margin of safety in your investments is the difference between the price you pay for your shares and their value , as you can see in the small graph right.While the value of a stock is determined by the quality of the business behind it, the price of the stock depends to a large extent on the mood of the participants in the stock market .
In the long term the price of a stock tends to coincide fairly accurately with its value , but in the short term it hovers around it , sometimes above, sometimes below.
Therefore, when you pay for a stock a price lower than its value, you are obtaining a margin of safety that helps you to reduce the risk of such investment.
After all, the margin of security is like a mattress that covers you in case the value of your shares decreases due to a permanent deterioration in the quality of your business. In addition, it also covers you against possible calculation errors that you can commit.
And, how do you manage to increase your margin of safety? Well, applying a business approach to buy good business at prices below its value . And, eye! Expanding your safety margin will not only reduce the risk of your investments , but also increase profitability , since you will pay less in exchange for the same dividend and / or the same value.
Remember that if you want to learn to invest better, you must be very clear about the difference between price and value.
5) Flee from what is fashionable
If you want to buy cheap you must run away from the actions that are fashionable , which everyone wants because they have gone up a lot of price, as it is more than likely that they are expensive and do not offer any margin of safety. When on the TV, in the elevator and in the hairdressing salon everyone talks about the fantastic actions they have just bought, extreme caution.I already advance you that it is not easy to go against the majority, but starting from the base of the 90-90-90 statistic that says that most of the people lose money in the Stock Exchange, it is easy to understand that if you want to get results Unlike most, you must do different things, and buying cheap is one of them.
So, when you identify a business that you like, wait patiently for the madness and fear of others to offer you their shares at really low prices, which usually happens in those big drops of the Exchange that change the life to better.
6) Think independently
If you want to make money in the stock market you must think independently . It is good to listen to the opinions of others, especially if they know more, but you must have enough criteria to make your own investment decisions. You are the one who knows your goals, your situation and your personality better than anyone, so you are the best person to make your own decisions.Also, as you have already seen, you must have enough strength to go against the crowd, throwing yourself aside when everyone frantically buys absurd prices and acting with serenity and security to buy when everyone else is terrified.
7) Do not invest money that you do not have
Many people, seeing that they have little money available to invest, decide to borrow money from the broker or any other source of credit to buy shares on the stock market, using what is technically known as leverage .My recommendation is that you do not do it, since you considerably increase the risk that small movements in the price of your shares force you to close your positions at the worst moment.
Remember that if you want to create and maintain a wealth that will generate income indefinitely, your investment term should also be undefined. Think that sooner or later you will have to pay back your debt, so the term of this does not fit naturally with your investments, even if you renew it.
Believe me, invest to increase your quality of life, your tranquility and your freedom , and borrowing money is not the way to achieve it. I'll tell you more, if you accept borrowed money, it's you who is working for your broker, since this broker is lending it to you in exchange for some interest.
Remember that it is about acquiring assets that work for you, not that you become the asset of another.
8) To invest you must speak the language of business
You must understand that, if you want to invest with a business focus to get your money to work for you, you must learn to speak the language of business . In other words, you must learn to read financial statements.And, what are the financial statements? These are the documents where companies publish their balance sheets, their income statements and all the information related to the operation of the business . If now this sounds like Chinese do not worry, because you can learn without studying a career in ADE, economic or similar.
Being able to interpret the financial statements is essential to know in which companies to invest your money, since to make good investments you must buy good companies and get away from the mediocre ones.
9) Form yourself properly
Investing does not mean buying shares and that's it. It means having a knowledge, a methodology and a proper mentality to do what you have to do at the right time . Therefore, as in any other discipline, you must train continuously if you want your investment level to be increased and evolving.I do not know if it will be your case, but if you have been willing to study I do not know how many years to have access to a low-paying job that you do not like, why not study a little in exchange for gaining peace and freedom for life?
I assure you that as you increase your investment level, your results will reflect it and you will gain in quality of life.
So you know, if you want to get the most out of your money to invest better, give a business approach to your investments, invest in the long term , buy your very cheap shares to increase your margin of safety, avoid what is Fashion, think independently, learn the language of business and do not forget to train properly
By incorporating these 9 keys to your investment routine, I am convinced that it will help you invest better to get even closer to your financial goals and your desired life.
Do you use any of these keys in your investment routine? What other keys do you think you can use to invest better in the stock market?
If you want to increase your chances of investing successfully, apart from giving your investments an entrepreneurial approach (yes, I have said it again), you should look for potential businesses in which to invest your money, analyze them to select the highest quality, create your pre-portfolio and wait patiently for them to be on offer . And do not forget to check your business from time to time !
I hope that these 5 steps will give you a mental outline of the day to day of your investment routine so that you can face your investments with the greatest guarantees of success. In the next articles I will go deeper into each of them to talk about more concrete steps, so do not miss any of them.
What are the steps of your investment routine? Which do you think is the most important?
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