Successful investing is a marathon not a sprint. It’s always essential to take a long-term look at your investments and to get the basics in place fist. For most people this means buying a home they can afford and not worrying too much about fluctuations in value.
You can quickly find out more here about how investing in your own bricks and mortar always makes sense over the course of a lifetime. But once you’ve got the basics in place – how do you invest wisely and how, specifically, do you make sure you maximize your returns?
If you’re already a regular investor you may have noticed an aggravating trait – and that is that you seldom sell at the top. Very often, shares in companies which seem to be excellent value continue to rise after you’ve sold. Here are a few ways around this tricky situation:
First and most important, you have to learn to accept this. An inevitable part of being a good value investor is to see good value recovery situations continue on to greater heights after you’ve seen the value come out. It’s a fact of life that this will happen from time to time – as will the opposite, i.e. you will get some investments wrong. Don’t over-worry about this. Remember, the ultimate aim is to improve your wealth overall and to generate a good income from it for your freedom. So always try to consider the bigger picture and accept that no investor is perfect.
Secondly, be patient. If your investments offer a little of everything like value and growth, then don’t be tempted into selling too soon. Try to be longer-headed and not too quick to take too small a profit. Very often, companies which aren’t doing too well but which appear to be excellent value based on fundamentals with a strong balance sheet recover then become growth stories (or “re-growth” stories if you will).). In such situations it’s wise to wait.
If you’re not sure what to do, but the share price has risen and you think that the main value has been outed, but you also think the company may grow – then sell half of your shares and let the rest do what they will. This is particularly great when the shares have already doubled but you think there could be more to come given a fair wind.
You will very rarely buy at the absolute bottom or sell at the highs – but do try to run your winners a little longer. Also, don’t be too tempted to use a stop loss unless the company in which you’ve invested is a real blue-sky growth story. If it’s a value situation and the price declines, it could well be simply more of a bargain so resolve to buy more if the story hasn’t changed, or simply show patience and confidence in your original reasoning. If the story has fundamentally changed, however, then of course you need to reevaluate. So try to be as confident as you can about your safety margin, and try not to over-trade.
Buying quality on weakness and showing patience are the most important traits of successful investing.