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In this exclusive article Clem Chambers, Forbes columnist and author of the Amazon No.1 investing bestseller 101 Ways to Pick Stock Market Winners, discusses the five golden rules to help you start trading successfully.
The 5 Golden Rules of Investing Success, by Clem Chambers.
Incisive, honest and essential, Clem Chambers’ 101 Ways to Pick Stock Market Winners is the Amazon-bestselling investing guide.
There are many more people watching share prices than investing in stocks. Most realise that investing is the way out of living from pay check to pay check, but do not know where to start.
Stocks and shares seem to be the reserve of the rich; a risky business where the novice loses their shirt. But there must be a way to get started without getting burned?
Here are five rules to stock market investing success to get you started.
Rule 1 – Build a stock portfolio of 30 shares.
Take no notice of the people that say put all your eggs in one basket. A portfolio gives you a certainty that bad luck won’t hurt you and that your choices on average will deliver the return your share picking deserves. This portfolio return over the years will outperform anything a bank will offer you on deposit and will compound.
A diversified portfolio will mean you will miss out on good luck, but investing isn’t about good luck. Bad luck and good luck cancel out over time but if you have too much of your money in too few shares then bad luck can knock you out of the game.
Rule 2 – Until you own at least 30 different shares never buy more than £1000’s worth of any share.
Risking too much on any stock investment is a recipe for disaster, even for the sophisticated stock market investor. Keeping your individual share investments small keeps your capital pot safe and lowers the stress that can make investing unpleasant. Once you have 30 stocks you can grow the scale of each investment, but until that day stay small.
Rule 3 – Get online and get the stock picking tools of modern investing.
A free ADVFN account provides investors with free stock market tools that a few years ago would not even be available to the professional fund manager;
- Real time share prices.
- Fundamental information.
- Portfolio tracking.
- News.
- Opinion.
- Many more free services!
These free services let you make highly informed financial decisions on what share to buy and when to sell them.Researching your stock market investments might seem like work. That is because stock market investing is work.
Sadly investing is not a short cut to wealth, you need to treat it like any other way of making money -with focus and determination. Hopefully you will find it a lot of fun and more like a pastime than a chore.
Rule 4 – Always pick stocks using charts.
There will always be new ways to make money using charts and over time they will stop working. This is the way it is with markets.
To be successful you need to be constantly on the lookout for new methods; old ones are always eaten away by the efficient market. To make gold you must slowly destroy your philosopher’s stone and then make another.
Rule 5 – Invest in shares for the long-term.
Buy shares you think you will hold for three or more years. Do not make your broker rich and yourself poor by trying to trade. When the world’s most successful investor, Warren Buffett, claims sloth as his most profitable investing trait you should take note. Slow and steady wins the stock market investing race. Value investing is a great skill to learn.
Put your investing money in a SIPP or ISA and let the profits roll up tax free. While interest from the bank is taxed, using these tools can protect your stock market profits and dividends from tax; one more reason to let the long-term take hold.
Just remember, by the time you can afford a Ferrari from stock investing you will be too old to want one. You think that’s bad? Perhaps you should wonder if you have any other way to get Ferrari rich at all, before you worry how long it will take.
If you can see stock market investing as a part time job from now until retirement you will do very well indeed from it; it is the short-term forex and share traders that get burnt.
If you register with ADVFN, you will receive a free, easy to follow guide on ‘How to Invest’.
“Most realise that investing is the way out of living from pay check to pay check…..” Realize is spelled with a “z” not an “s”.
“But there must be away to get started without getting burned?”
a way not “away”
These two errors early in your advertisement make people “realise” they want to go “away” from your site. Good luck!
Thomas, this article is obviously written by someone from the U.K. where the spellings are different! Duh. (pounds mentioned instead of ‘dollars’).
Get out and read more.
Incredibly poor advice. Far worse than an S&P index fund, and people don’t have the time (or detailed knowledge) to adequately build a portfolio of 30 stocks. No need to use charts if you plan to hold stocks a long time. 2-3 years is not a long time, you’re annual turnover is 33-50%
This guy oughta learn some FOCUS investing. Book or not – this guy is more trader than investor.
KEEP AWAY!
That’s scary advice. Predict a 10-15% correction next year but the Fed won’t end QE that quickly. Pulling the stimulus needle out too fast will cause a crash and either way we’re looking at inflation over the next several years. Hang on to your seats!
I don’t think this writer has good advice on investing. Maybe he owns nothing but DRIPS. Maybe he has only invested during the current bull market and has not experienced a bear market. Yes, some consider 30 shares as diversified (99%), but it may not be, if all 30 are concentrated in one industry, say for example: pharmaceuticals. There is a cost to purchasing a share or shares of 30 companies. Then to sell them in the distant future will incur more costs. Use charts only if you understand them and their limitations. Keeping track of 30 companies can be a monumental challenge.
Note: In England they spell realize, realise.
“To be successful you need to be constantly on the lookout for new methods; old ones are always eaten away by the efficient market. To make gold you must slowly destroy your philosopher’s stone and then make another.”
Wow… talk about the quote that shows this guy has absolutely NO credibility.
I own 31 stocks. I have them in four groups. I no longer invest in group one shares other than reinvesting dividends. I am trying to get the same value in all 31, but it is difficult as level one and two are growing faster than I can increase values in levels three and four. I only invest in dividend paying stocks and use a book by Lowell Miller as a guide as his investment method is like mine. I own many different types of companies providing many services/products.
31 Stocks good freak’n luck. Think long term good freak’n luck.
COMMON SENSSE! How useful is the product you are betting on is the KEY. None is better.
I respect the writer’s opinion but recognize that it is merely his opinion. One does not need 30 stocks to diversify; a best of breed stock in at least 5 different sectors will provide adequate diversification. Look for companies with products that are in demand or products which have a competitive edge and staying power. That is, 5 years from now, the product(s)will not be obsolete. Pay a reasonable price if possible. But if you are a long-term investor (plans to hold forever), buying a great company at an unreasonable price, will work out in the long run. But I love buying great companies when they go on sale; the always do you know. How do you know if the price is reasonable? There are many different metrics for determining reasonableness. For example, among several things I look at, is the Price to Growth Ratio (PEG). I consider a PEG of under 1 a bargain, if all other criteria pass my smell test. I will suggest an example of a diversified portfolio, but it is not a recommendation: GILD; DIS; NKE; UNP; COP; PF; CL, JPM and CAT. Each of those 9 companies is in a different industry; all but one pay dividends; one can argue that all represent best of breed in their respective companies. The one drawback is that most are not cheap and do not have a projected 5-year growth rate of at leasst 13%, which I like. But the main point of this sample portfolio is diversification.
As a full-time trader, I’d observe that this is possibly the worst advice I’ve read in a long time. Positively evil, in a way.
Everyone is entitled to their opinion – but you know opinion are like a certain part of the body – the belly button – all is does is get dirty and collect lent. Warren Buffet is a tale of two cities – Berkshire he has about 30 stocks but is always looking for something new but the majority is in 5 stocks one of those is Coke. But in a story I read years ago he once said one of the worst decision he ever made was not selling KO when it was in its $80.00 and buying Pepsi. KO has never gotten back to $80.00 and he would have 3 times as many shares of Pepsi and Pepsi has grown much much faster in share value.
Mr. Buffett says that diversification is bad – “Why take out Micheal Jordon and put in a unproved rookie straight from college. But if can every find out what Mr. Buffett trades in his personal account – not much of it is in stocks that Berkshire Hathaway owns. Does the Oracle of Omaha talk with forked tongue – not really. He talks about BK trades and leaves his private trades out of the discussion.
Trading individual stocks with less than $1,000 will eat you alive in commissions. You need $5,000+ to build good modest trading positions unless you’re trading options. Advice for true novice investors: Buy a Nasdaq or S&P Index tracking ETF and dollar cost average. You’ll get good diversification and lower fees. Otherwise, study up or find a professional for help.
Put the minever invest in Hedge funds they often sink or disappear.
Ibvest in Capital safe market.
have enough to spare , invest in tental Property.
We read number of people lost everything in shares.
@ Thomas: not here in the U.K. it isn’t, ‘realise’ is spelt with an ‘s’
Glad I’m not the only one who read this and thought, ‘Nope, broke all these rules, and will continue to do so!’. Don’t know where he’s coming from, but he surely can’t be making much with this approach.