How To Be a Better Investor

For best results when investing in stocks, here are some tips to keep in mind:

• Be ready to invest. Pay off any high-interest-rate debt and establish an emergency fund before investing.

• Have a long-term view and be patient. Stocks can make you rich, but you generally have to hang on to them for many years.

• Invest aggressively, and soon. The first dollars you invest have the longest time in which to grow for you, so invest meaningful sums as soon as possible, and regularly.

• Have rational expectations. Expect the market (and your stocks) to rise and fall. Expect some losses.

• Keep your emotions in check. Don’t sell in a frantic rush when the market swoons, and don’t grab shares of hot stocks at any price just to own them.

• Know what you’re investing in. Research companies before investing in them: Learn how they make their money, how healthy they are, how much growth potential they have and what their risks and opportunities are.

• Diversify. Don’t keep all your eggs in one basket. Spread your dollars across different kinds of companies.

• Watch your performance. If your stock picking isn’t outperforming the overall stock market over several years, consider just investing in index funds that deliver roughly the same returns as the market.

• Have a margin of safety. Aim to buy shares of stock when they seem underpriced. Overpriced stocks are more likely to fall, while underpriced ones have a margin of safety built in.

• Keep it simple with index funds. Stock investing doesn’t have to be complicated. Most of us would do well to just stick with low-fee broad-market index funds.

• Keep learning. At a minimum, learn from your mistakes so you avoid repeating costly blunders. Reading books or articles on investing, great investors and great companies can make you a savvier investor, too.