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Profitable Investing

There are several keys to profitable investing. The most important are diligence, patience, and measured choices. But, how about some great tips on dividend stocks , or investing in companies with cash ? The trouble with stock tips is that the stock market adjusts for new information and does so rather rapidly. For most investors a great stock tip was great the moment it was first passed on from an analyst or insider to the next person. By the time it trickles down the information tree the market has typically discounted whatever information the tip included. The other fact to consider is that profitable investing is a long term endeavor, taking place over many years. Tips, if one gets one early enough, are usually only useful for stock traders who jump in and out of stock positions.

Diligence is the first part of profitable investing. Successful long term investors look for stocks with intrinsic value. That is a forward looking income stream. They also prefer stocks with a margin of safety in the form of cash, unencumbered assets, or long term patent rights. A stock that ranks well in both criteria will likely appreciate nicely over the years and will not be in dire straits during a recession. Diligence in profitable investing is searching out these stocks and keeping track of them. The investor asks himself what is a good investment and what are safe investments . Then he applies a standardized set of criteria to find and follow them.

Patience works in profitable investing. A great stock with steady price appreciation and a strong margin of safety will commonly have been bid up by the market and be selling for a high price to earnings ratio. How to invest in stocks most profitably is to find good stocks and then wait for their price to correct. It is common for the entire market to fall due to bad economic news or other factors. However, with a little thought and research an investor can decide if one of the stock he has been following really deserves to fall in price. The current sovereign debt crisis in Europe is a case in point. A patient investor will wait for a downturn in prices and buy a stock he has been watching.

Profitable investing has to do with measured choices. A smart investor develops an investment plan. He diversifies his stock portfolio with stocks from several market sectors and a combination of secure large cap stocks as well as a couple of promising growth stocks. He diversifies his investments in general by keeping cash, investing in bonds and treasury bills and buying a home for which the mortgage interest is deductible on his taxes as well investing in stocks. Profitable investing comes from measured choices. With the run up in gold prices over decade, for example, investors ask is gold a profitable investment ? The answer, after prices fell recently, is not “it used to be and now it isn’t.” The answer to profitable investing in gold or any investment vehicle is diligence, patience, and measured choices. Study the investment opportunity. Only buy when prices and expectations are favorable. Make a plan, follow the plan, and periodically review the plan. That is a good way to achieve profitable investing over the years.

 

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