20 Mar

How to Be a Successful Investor

March 20, 2021

Warren Buffet did not become successful in a single day. It took him decades of learning and self-development to get to the point where he is. Being right in some situations is not a winning stock investment strategy. In order for you to be successful in investing in the stock market, you have to understand how the market actually works as well as to develop a better mindset by introducing new principles in your life. There are also tax stipulations you’ll need to become more aware of, such as day trading taxes. Let’s take a look at what it takes to make successful investments.

Getting Started

Successful investing is a marathon, not a single event. Therefore, when it comes to getting started in investing, you should prepare yourself as if you were going for a long trip. One of the things you should do is to determine what your end destination is, as to which you can formulate your investment plan accordingly. For instance, if your end destination is to retire at the age of 65, how much money do you need to accomplish this?

Learn the Science of the Market

Many people never consider the possibility of investing, simply because they didn’t take the time to learn what works in the market. Once you become more aware of everything that’s going on, you will become more confident about your investment choices as well as receiving better results. Therefore, you need to read books as well as to take courses that cover modern financial techniques.

The individuals who developed techniques such as market efficiency, diversification, and portfolio optimization, all received Nobel prizes for good reasons. Investing in the stock market is a combination of art and science. The scientific aspect of the stock market should not be overlooked and this is a good place to start when it comes to learning how the market works as a whole such as the difference between a growing and mature company or factors that affect a stock’s price for example.

Be Open to Learning on an Ongoing Basis

Even though the stock market is difficult to predict, one of the things that is certain is that it’s volatile. Therefore, the concept of learning how to be a better stock investor is a continuous process that requires time and effort to learn new things, similarly to how a doctor has to continuously go back to school to stay up to date with modern advances in surgery and medicine.

Learn the Business Model of Each Company You Want to Invest In

Even though it may seem like common sense, many individuals invest in businesses that are outside the span of their knowledge base. Most experts agree that unless you know how the economics of industry works, as well as to be knowledgeable enough to forecast where a given company may be in 5-10 years, it may not be a good idea to purchase stock in that particular company. In fact, Warren Buffett is well known for the vast amount of knowledge he has in finance, accounting, tax law, and business.

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As such, you might have assumed that he “goes with the trend” as far as his investment strategy goes. In all actuality, he proclaimed that he knows that people will be doing things like using Gillette Blades, eating Snickers, and drinking Coke in another ten to twenty years, so he invests in those types of companies. However, he said that while some people are able to make money by investing in telecom and cocoa bean companies, he doesn’t because he doesn’t know how those industries work. He proclaimed that he only invests in industries that he knows very well. Therefore, you need to understand the business model of the company in addition to the industry the company operates in before you invest in it.

Learn About Federal and State Regulations to Avoid Investment Tax Shock

Tax season is considered to be a day of reckoning for unaware investors. During this period, Uncle Sam requires that he gets his ‘fair’ slice of dividends, capital gains, and interest. In some cases, the calculations are simple. However, some assets can throw curve balls that can catch you off guard with a surprise tax bill. Therefore, ensure that you study tax guidelines when it comes to picking a new type of holding. In addition to that, do not wait until the very last minute to prepare your tax return and ensure that you have enough money to take care of a surprise tax bill.

By Taylor Wilman


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