How to Become a Successful Investor

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“How to become a successful investor” is a famous question especially from the beginner investors. Is their any crash course or cheat sheet to become successful with stock market investing? No.

If you are a beginner investor with the above question in your mind, of course, it is the right article for you to go ahead with. It give all the ideas to become a successful investor!

Remember the equation throughout reading this article: Beginner Investor = Loss

How to become a successful investor – Introduction

I have already posted a step by step guide for beginner investors. While reading, you will gain more knowledge along with the same.

For a beginner, investing is not an easy task. Generally beginners come up with lots of doubts and confusions on investing. Most of them start investing by the influence of colleagues, friends or others!

They may see their friends or others are investing or a story of how others making profits by investing. Before knowing or trying to understand what is investing, most of the beginners open a trading account and put some money to start trading even before knowing the commission structure, fees and other details of the trading account!

Yes, I have done the same years back when I was the beginner, but now I can proudly say that I have acquired necessary investment knowledge through various channels. I will share my experience for those willing to start investing in stock market.

Read………read………and…..re-read

I emphasized the importance of ‘reading’ in various articles in this blog, specifically, on various guest article I have posted. If you really would like to become a successful investor, you must know the basics about successful investing.

Every beginner investor must read at least these three simple books, “Common Stocks and Uncommon Profits” by Philip Fisher, “Lessons from the Legends of Wall Street” by Nikki Ross, “John Bogle on Investing” by John C Bogle.

Remember, these books will not make you rich but it will guide you on how to invest to become rich!

What should a beginner investor do first?

Beginner investor must start from scratch! In that, they should start acquiring basic knowledge on:

  • What is a piece of stock
  • What stock market does
  • How stock market works
  • Who all are connected to stock market?
  • How and why companies listing in the stock market
  • What is an initial public offer (IPO) and what is secondary market?
  • How could one buy and sell from IPO or from stock market
  • Requirements to buy and sell stocks and what are the costs and taxes
  • What is a stock market index and what influences a stock market move up and down
  • what are the major factors influencing the stock market volatility

These are the basic information every starter investor to know at the beginning.

Understand the investment instruments

Stock market investment not only can be done through buying stocks directly, but various investment instruments are available to get the equity investment exposures. However, an investor must acquire right knowledge on these instruments and difference from direct stock investing.

Learn about various investment instruments providing equity investment exposures to beginner investors. Mutual funds and ETF are the best in class to invest and build portfolio.

Understand, what is a mutual fund and different types of mutual funds. Ans specifically, what are the differences between these funds.

Understand, what is in an ETF (Exchange Traded Fund) and how one could benefit to invest on it. Learn what is index funds from mutual fund houses and its difference from Exchange Traded Funds or ETF’s listed in the stock markets.

Knowledge on these areas help you to create good investment portfolios with right products, good diversification, less risk and maximum profit potentials.

Get direct stock investment knowledge

Third step is to learn about direct stock market investments. Understand day trading, long time value investing, growth investing and contrarian investing. Especially, study the difference between short time trading and long time value investing.

Learn the fees and commissions associated to transactions and the risks associated to various investing styles.

Understand fundamental analysis and technical analysis methods and who all are using each. Know the difference between trading and investing.

Learn from legend investors

Find enough time to learn from legend investors. I am not asking to follow them but learn from their investment tactics, methods and secrets to become successful investor. Use genuine materials to learn the skills

I do recommend reading stories of Warren Buffet, Philip Fisher, Benjamin Graham, and Sir John Templeton. Learn about beginning of their career, their experiences, investment styles and practices.

You can do homework on their highly successful strategies and practices to structure and create your own intellectual framework for investing. You can find my own investment framework to understand how I created one from the strategies of Warren Buffet. Philip Phisher.

Avoid common investment mistakes

I have already posted an article on 20 deadly investment mistakes investors commits frequently and posting below the most common mistakes that beginner investors commit.

  • Don’t follow public
  • Don’t listen brokers, tipsters and research analysts and others
  • Never invest huge at the beginning
  • Buying high and selling low

Instead, read, learn and create your own golden investing rules to succeed!

Things to remember before buying your first stock/share

  • You must have your personal investment framework or golden rules in hand, specifically for finding and investing in stocks
  • You must do your homework to find the right businesses to invest and ensure the businesses meet your requirements mentioned in the investment framework.
  • Ensure your investment is happening in the right time to avoid the mistake of buying high and selling low. Read how micro and macro factors affecting the stock market to identify the right buying time
  • As a tip, invest on bluechip stocks in the beginning to have enough exposure on the buying time and having capital protection.

How to find the best stock broker to start investing

When investing as beginner, the first step is to identifying a best online broker. When selecting a broker, take care to consider the following:

  • Checkout the commissions. Brokers with best service and minimum service can be preferred.
  • Prefer brokers do not required account minimum balance. Especially for starters.
  • Check the yearly fees for account maintenance. Specifically, check for annual fees, inactivity fees etc.
  • Ensure you are selecting the best broker specialized for stock trading. There are brokers specialized to mutual funds, ETF and Bonds too.
  • Moreover that, the selected broker is good enough to provide best services match to the investment style of customer
  • Using broker comparison charts considered as a good method identify the best. Compare the buying, selling, holding charges especially.