The rich have learned certain rules that help them make consistent profits from their investments.
The ten investing rules I present here will greatly increase your chance of financial success if you follow them. Let’s go through them now.
One of the more interesting lessons in investing is to not think about making money at all. You are investing to make money, of course, but paradoxically, giving up that goal, giving up any thought that you will make money or gain anything from the investment, frees you to listen to the markets and what is really going on. It is removing your emotions from the investing equation.
One of the more interesting lessons in investing is to not think about making money at all. You are investing to make money, of course, but paradoxically, giving up that goal frees you to listen to the markets and hear what’s really going on. This process allows you to invest in an impartial and unbiased manner. This is all about removing your emotions from the investing equation.
Emotions and money are a deadly mix. Your emotions will push you to do the wrong thing at the wrong time, like sell at the bottom of a market, or buy at the top.
For example, by focusing on how much money you think you’re going to make in a real estate deal, you may not do the due diligence required to make sure the investment is a financially sound one. Or fear of losing your gain in a stock pushes you to sell it for no logically valid reason, causing you to miss out on future large gains in the stock.
This is why having a investing system that you follow is so important. A proven system keeps emotions in check. By following the system diligently you do your homework and act only on investments that are most likely to succeed.
Whether you win or lose on any investment, it’s important to not react emotionally. It’s especially important not to react negatively with anger or frustration. If the investment didn’t work out as planned, you just acknowledge what happened, determine what you could do better next time, and move on to the next investment.
It’s not easy keeping emotions out of investing. But it is vitally important that you do.
The most successful investors don’t really care about the money. They look at investing as like a game, and money is the score. Billionaires like Donald Trump enjoy the game, battling wits with other investors for the prize. Winning for him means experiencing the thrill of owning trophy properties in major cities like New York City. The money made is really secondary.
Many millionaires and billionaires end up on the losing side of a major investment and experience a wipeout. Trump lost it all a couple of times. Investors like Trump usually lose because they over-leverage their investment by using too much debt. But Trump gets right back in the game, and within a few years he has made it all back and more.
How you handle the ups and downs of investing and the emotions of winning and losing is a more significant factor to your overall investing success than the individual investments or the investing method you choose. Although a mastery of basic investing tools and techniques is mandatory, ultimately how you think, feel, and manage your emotions is critical to success.
Can you follow one of the basic tenets of investing, “Cut your losers quickly?” Can you admit to being wrong, and exiting a position at a loss?
This leads us to the next rule….
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