Following on from part 1 in last week’s post, we continue exploring the 15 commandments of investing for higher returns with less risk.
If you are investing in stocks and shares as a way to grow your personal wealth and/or income then you need to start following these commandments a.s.a.p. to consistently pick the best shares at the right time and minimize your mistakes.
The first 7 commandments were covered in last week’s post.
Here are the remaining 8 “commandments” that I recommend you do when picking your shares for your portfolio:
8. Thou Shalt BUY shares At The Right Time
Everyone knows that you should buy shares when they are cheap and sell when they are expensive but how can you tell when a share is cheap?
Don’t make the beginner’s mistake of assuming that shares that only cost a few pence each are cheap!
Penny shares like these can be expensive if the share price is overvaluing the company so make sure that you know how to value a company properly before you buy.
9. Thou Shalt SELL Your Shares At The Right Time
When you buy shares in a company and their price rises, you have an “unrealizable gain”.
In other words, you are worth more on paper, but you’ve not actually made any money until you realize the gain by selling your shares.
Maximizing your returns therefore means that you need to know when your shares have become overvalued so that you can sell them at the right time.
10. Thou Shalt Have More CONFIDENCE In Your Own Decision-Making
The shares that have been the best investment for me have been those that I have bought based on my own research and analysis.
If you want to do this then you need to develop the CONFIDENCE in your own research and in making your own decisions about buying and selling.
11. Thou Shalt Go AGAINST THE CROWD When It Makes Sense To Do So
Following tips in magazines, blogs, newspapers, etc. very rarely turn out to be good investments because lots of other investors are reading the same tips and buying them before you do, hence causing the price to rise.
It therefore follows that you have to go against the crowd if you want to make the best investment returns by buying shares that are “unpopular.”
12. Thou Shalt FOLLOW THE CROWD When It Makes Sense To Do So
Despite commandment 11, there are times when following the crowd is the right thing to do.
For example, when some news is published that informs you that one of the companies you have shares in has taken a bad turn or has done something it shouldn’t.
13. Thou Shalt LEARN From Your Mistakes And Successes
Whatever decisions you make, you will undoubtedly make some mistakes – it’s all part of the learning curve and is to be expected.
However, whilst making mistakes is great because it provides you with an opportunity to learn, making the same mistake again is not!
Similarly, you’ll make more money in the long run if you also understand what causes your successes so that you can look for the same situation in future.
14. Thou Shalt Apply DELIBERATE PRACTICE Techniques Consistently
Taking action by buying or selling a share, examining the results of that action and then making adjustments to your systematic approach so that you continuously improve over time is known as DELIBERATE PRACTICE.
It is the approach used by all great sports stars, business people, investors and, indeed, anybody who reaches the top of their field.
Whilst you don’t need to be the best investor in the world to make money investing in shares, applying deliberate practice techniques consistently will help you to become the best that you can be.
15. Thou Shalt Put It All Together
There is no doubt that following the commandments, as I have described here, is key to improving your investment success.
When you get into the habit of following them properly and consistently, you will not only improve your share picking, but you will time your buys and sells better and make fewer mistakes.
Ultimately, you will achieve bigger returns with your investments than you have hitherto, so why not give them a go?
If you’d like to follow a tried and tested process with detailed checklists of what to analyze then you can find out about our Company Analysis Workbook by clicking here.
It follows all 15 of the commandments systematically and will pay for itself many, many times over as soon as you start to use it.
Otherwise, leave your comments below about the 15 commandments and to let me know if you think I’ve missed any.