All Great Investors Know These Two Things

This is a syndicated repost courtesy of Money Morning - We Make Investing Profitable. To view original, click here. Reposted with permission.

If there’s one thing new investors aren’t short on, it’s advice. There are so many “investing adages,” “Wall Street adages,” and other golden nuggets meant to guide investors, it’s overwhelming.

There’s some truth to all of them, and they all have their place for investors who might find themselves facing a difficult situation.

But here’s the thing – none of them really help investors make the most important investing call: the decision to get started. It turns out investors often find that figuring out the market isn’t nearly as important as being in the market in the first place.

Fortunately, whether you’re an absolute, rank beginner or someone who’s been sitting this bull market out on the sidelines, I’ve got some help for you.

Here it is…

“You’ve Got to Be In It to Win It”

Sounds easy, right? That’s because it is.

In fact, I’ll prove it to you right now, and you’ll not only have the confidence to start investing, you’ll wonder why no one ever told you this before.

In order to be totally comfortable investing – and I mean absolutely completely at ease with it – you only have to know two things. Everything else you’ll learn along the way to becoming super successful.

The most important thing you need to know is that every investment starts with a “trade.”

All that means is that no matter how much or how little research you do, or if you’re taking a position on something – anything – based on something you read, or heard, or “feel,” it’s always the same.


You have to make the move. You have to buy the stock, the ETF, whatever it is you’re trading. You have to open a position.

Putting that position on is a “trade.”

You aren’t investing in that position. You might end up with a fabulous investment, but you might not.

By looking at any position you open as a “trade” and not an “investment,” you know you’re not “married” to it.

If you love it because it goes your way, go ahead and marry it. But if it goes against you, you simply get a no-fault divorce and dump the position. No entanglements, no tears, just maybe a small loss.

And you move on, a lot wiser, and hopefully not too much poorer, for making the mistake.

Every time you initiate a trade – every time – there are only two outcomes that you face: Either the trade goes your way or it doesn’t.

If it doesn’t work out, take a small, manageable loss, say 5% or 10% of the capital you put into the position, and get out of the trade – but don’t let the fact that you cleverly escaped with a tiny loss go to your head.

I always think like a trader when I put on a new position.

I know I could be right, but there’s always a chance the market or the stock does something I don’t expect, and the position goes against me.

At least I’m in the game.

You can’t be afraid to lose a few bucks. It’s part of the game. You can’t win a race if you don’t run it. You don’t start off running. You start off taking a first step. You start off with one trade and – BAM – you’re in it.

That puts you halfway there…

Be Aware of What You’re Buying

Now, whether you’re an absolute beginner or you’re just coming back in from a breather on the sidelines, you should always know which way the market, or your stock, or ETF, or whatever it is you’re taking a position in, is going.

Has it been going up, or has it been going down?

As a beginner, you always want to be on the ride in the direction it’s going.

It’s just easier that way.

If the market is going up, go for the ride. If the stock of a company you like is going up because they’re selling a lot more of what they make, go along for the ride.

Don’t fight the trend.

“The trend is your friend.” Now that is an investing and a Wall Street adage worth knowing. In fact, it’s the best one ever.

Okay, you’ve got it. Get in the game and go with the flow, go with the trend.

Starting now…

Here’s What to Do to Get Going Today

We’ll keep it super simple.

The trend of the entire market is up. So you’re going to buy “the market.”

“Why is it up?” you should be asking. Because you have to have some understanding to pull the trigger.

The market’s been going up since 2009, steadily. Here’s why it’s going to keep going up.

The number of listed companies on U.S. exchanges peaked in 1998 at 7,562. As of August 2016, the number of listed companies in the United States is now only 3,659… that’s a drop of almost 52%.

Meanwhile, listed companies have been buying back their outstanding shares at a furious pace.

From 2002 through 2012, U.S. companies bought back $2.4 trillion worth of their own shares, according to the Harvard Business Review. Over the next four years, companies bought back another $5 trillion worth of their shares.

All those two statistics mean is that there are fewer shares of stock to buy every day that passes.

At the exact same time, there’s more capital being created every day. Whether the capital is created from earnings, or from central banks printing trillions of dollars’ worth of the stuff, there’s more of it every day.

And that money is always looking for a home where it can grow. The market is the best place for that, doubly especially because it keeps going up.

More money chasing fewer shares is a supply-and-demand equation that spells rising markets.

That’s the trend. It’s been the trend and it will continue to be the trend for a long time.

So, go buy the whole market.

I’m not kidding – there are funds like the SPDR S&P 500 Trust ETF (NYSE Arca: SPY), or the SPDR Dow Jones Industrial Average ETF (NYSE Arca: DIA), that allow you to buy “the market” with one stock.

That’s exactly how to get in.

You already know that you’re opening position that will be a “trade.” And because the market can always go down, you should sell your ETF if you lose maybe 10%. You can handle that.

If that happens, so what? You knew it could going in. You’re already a pro.

Just get back in when you see the market going back up again: The trend is your friend.

You’ve got to be in it to win it, and if you are, you can win over, and over, and over, and over again, and again, and again.

Go get you some!


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