A few tips and tricks to follow
- Make available adequate liquidity to invest
This means that on paper or in my head I already have a precise idea of how much I may invest and for how long, an amount sufficient to cover depreciation without having to sell, on the contrary, allowing me to purchase to improve the mean value.
- Have a diversified portfolio
This means investing in a number of actions which is varied in terms of geography and sectors: i.e. do not invest in similar stocks with the same type of risk, but rather on different markets and stock types.
- Have a stock portfolio with good dividends
Focus on stocks with an interesting dividend yield, with a consolidated trend at least in the past 10 years, this means picking strong and competitive options.
- Choose stocks with an excellent P/E (price to earnings ratio)
Another important thing to consider is to purchase stocks with a good ratio between current price and earnings in their sector, i.e. price to earnings ratio, which means getting stocks with a good price and good chances to perform better than average.
- Depreciation: remember the reason why I have chosen a stock
Experience teaches me that the ability to stay calm and refusing the frenzy of selling, when the bear bites the markets and the going gets tough, is the most important virtue for a trader.
In these cases, you need to remember the reason why you have purchased that very same stock and, if the reasons are still there, hold on tight and perhaps purchase some more to improve your average.
- Increase: remember the reason why I have chosen a stock
Again, when the bull is leading, you have to keep calm.
The saying goes: earn, sell and regret. If you believe you have earned enough on a stock and sell it, clearly that value could still increase a lot and thus you would regret it.
Again, you need to remember “why have I purchased that stock?” Are the reasons for my choice still there? Keeping calm may mean earning a lot more.
- Time is gold
At the beginning, I was talking about adequate liquidity… but that’s not enough! You also need to have it for a time long enough to yield markets’ opportunities: it may take years before you can disinvest!
You should start with the idea this will be a medium-/long-term investment, unless your timing is so good you have purchased in a “bear” moment with considerable depreciations!