Video Transcript
5 Tips to Being a Great Investor
1. Don't use money that you need right now
When you're investing, it's for a long period of time, usually years to decades, and you don't want to tie up money that you're going to need for something else like your mortgage or car payment.
2. Invest periodically
There's only a few times of year that are good for buying stocks long-term investing. Every day of the year isn't always the best time to buy long-term stocks. You'll have to do your research on when is usually the best time to buy your specific stocks, but you want to look at when throughout the year it tends to go up for a long period of time. That will be one to two, maybe three times per year for most long-term stocks. Otherwise, you don't buy that stock or more shares of it.
Instead, you take the money (say you're allotting a certain portion of your paycheck to buy more shares or to invest with) and get in the habit of saving it. Put it into a savings account or put it into your investment account as cash and let it sit there until those one, two, maybe three times, of the year where it is a good time to buy more of your long-term investment stocks. Buy them during those certain times of year allows you to take advantage of the normal rise the stock usually has during those times of year.
Related: The Difference Between Trading and Investing
3. Diversify
Don't buy all tech stocks, all bio stocks, all car manufacturers or all consumer stocks. You want to diversify by buying 10 to 12 stocks across different industries. If you were to put all of your money into one sector or industry and that industry is hit with bad news, your entire portfolio would decline. By spreading your investments across different industries, you potentially protect yourself from losing money.
4. It's not a popularity contest
You don't want to pick popular stocks. Weird? Just hear me out...
You want some of the most boring stocks you can think of for your long-term investments, because their price doesn't move a lot from day-to-day.
I know you want to be like...
I get it. It's great when a stock goes up $10 in one day but when it goes down $10 in one day a lot of people freak out and sell. Instead, stick to companies that have been around for a long time and will probably continue to be around for even longer. Companies like GE, Coca-Cola, General Mills, Johnson & Johnson, and Hershey, those types of companies are what I mean by long-term stocks. Their stock price doesn't move a lot day to day but they show continued growth year over year. You want to look for those types of stocks. Not the popular ones.
5. Leave it alone
Don't go messing with your investments once you've bought them! It's a long-term investment so it's going to be years to decades that you own these. Just buy it, leave it alone and wait for the next opportunity to buy more of those stocks as I mentioned in #2.
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What companies do you think would make good long-term investments? Tell me in the comments!
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