Successful strategies for buying and selling stocks

At the simplest level, if you put all your money in one share, you are either making a sudden huge profit or suffering a clothing loss.

For example, one of my neighbors put all his money into the stock of the big technology company, which is one of the best companies in the world.

After ten years of long-term investment, his portfolio has exceeded $ 30,000.

Instead of selling describing the shares or even some of them, my neighbor kept his shares even as the stock fell more and more, so he lost his home and divorced his wife and did not recover financially or herself after that. So if I will meet whether you should diversify your stocks. Then I suggest you do so.

In addition, some people invest all their money in the stock of the company they work for, and this is not always wise behavior: because if the company runs into difficulties, you can lose your money and your job.

Note: Some companies offer Employee Stock Purchase Programs (ESPPs) that allow you to buy company stock at a discount. 

In my opinion, this is an excellent way to build wealth through the stock market, especially if you work for a good company that makes increasing profits, but at some point, it makes sense to diversify your assets by selling some of those shares.

Here's how to diversify. Let's say that you are a 100% investor (that is, all of your investable money is in the stock market), in order for your investments to be fully diversified, you need at least 5 to 15 stocks in various fields. You will be introduced to investment funds and ETFs later on. ), Which offers live-action.

Many financial experts advise that you own a group of growth, value, and income stocks with a small number of global stocks, and you may also consider stocks of large and small companies.

Diversification can be American, and in order to do it right, you need to take into account the amount of risk you can take (this is called risk tolerance), your age, time horizon, and your investment goals.

Some just suggest that you buy stocks and bonds, but doing so is not always logical.

Asset allocation

Determine the amount of money allocated for each investment

Once you have a diversified investment portfolio, you have to decide what percentage of your money you want to allocate (or distribute to each investment. For example, if you still have 20 years to retire, you can invest 15% which are individual stocks, mutual funds, and 7). This is an example of an asset allocation.

In the past, you were told to subtract your lifetime from 100 to determine the percentage of assets you put in stocks. For example, if you are 40 years old, 100 minus 4 equals 60. This old formula suggests that you invest 20% in stocks and not in bonds.

The problem with this formula is that it is very conservative and can outlive you longer than his money. In addition, a severe market correction situation could cause all of your assets to collapse.

Conclusion: You want to diversify your assets appropriately. Unfortunately, what is considered "good" for someone may not actually work for you, so it takes time to understand diversification and asset allocation.

Accumulation

The accumulation principle is simply to make a profit out of your profits. There is something that you can do with your shares that can make you rich as long as you are a patient investor, and this thing is called “compound interest,” and Einstein wrote about it saying, “It is the eighth wonder of the world’s wonders. Whoever understands compound interest earns it, and whoever does not understand it pays it.

The idea behind compound interest is one of the reasons people reinvest any dividends and dividends.

Accumulation works as follows: You reinvest all your profits from your investments: interest, dividends, or capital gains, the longer you reinvest your profits, the more money you drain.

In other words, you are making money on the profits, not just on the original investment. If accumulation is new to you, the numbers may surprise you.

For example, if you lasted $ 100, and the amount increased by 10% in one year, then at the end of the year the total amount would be $ 11, so if you reinvested that $ 10, you would have $ 161 by the end of the next year, and the $ 10 would represent regular earnings.

As for that extra dollar, I see from the compound profits or the profits made from the profits of the 10 dollars in the first year.

This may not seem like extra money, but the accumulation year after year makes a big difference as the profits of your investment increase, multiply more quickly. 

Accumulation advocates remind you to invest early in your life if you want to have money at a later time. Believed them; Because that's right, and whatever your stakes, the time is right to start.

Later, you will learn that certain investments such as ETFs and mutual funds offer immediate diversification.