In the “Big Handbook for Successful Share Investors”, five economic experts wrote down strategies that turn even newcomers to the stock market into successful investors. The most important principles at a glance.
If you only read one stock market book in your life, The Big Handbook for Successful Stock Investors would be a good choice. Seasoned financial journalists and investors share insights from conversations with stock market legends like Warren Buffet and decades in the stock business. Newcomers will find everything they need to know. Experienced dealers receive interesting impulses.
Here are the top seven steps investors should take on the road to stock market success:
Everything about stock market trends, investment strategies, stock selection, balance sheets and taxes explained by Gisela Baur, Hans G. Linder, Brigitte Wallstabe-Watermann, Antonie Klotz and Peter Thilo Hasler.
Instead of getting nervous in the face of fluctuating stock prices, investors should think of the market as a manic depressive investor – let’s call him Mr. Market: Mr. Market buys and sells stocks on a daily basis, but sets prices at his whim. In euphoric phases he pays far too much, in depressive phases he sells at ridiculous prices. The exact value of a share is practically never reflected in its prices.
Stock investors make money by buying Mr. Market stocks cheap in times of depression and selling them high in times of euphoria.
However, many private investors do the opposite: they buy in euphoric phases because they fear missing out. When prices collapse, they panic sell and lose money.
The first lesson of the investor’s handbook is to use panic and over-euphoria instead of letting them drive you into poor trading decisions.
To apply Lesson One, investors should study the history of markets: euphoria and depression have alternated for decades. Every upswing is followed by a crisis, and every crisis is followed by an upswing.
Some investors allow themselves to be persuaded that everything is different this time; the future will remain dark or bright forever. You’re always wrong.
Historically trained investors know that no high or low lasts forever. This allows them to stay true to their principles with nerves of steel in euphoric or depressive phases. They buy greedily when everyone sells fearfully; and sell fearfully when everyone is buying greedily. “Discipline is everything,” write the authors of the investor handbook.
Everyone is familiar with daily stock market analyzes based on the motto: “Good labor market data drove the Dax up three percent today” or “Inflation is causing prices to plummet.” None of this is true.
Stock prices rise or fall for one reason only: the balance of supply and demand. Buy more people, the price goes up. Sell more people, the price falls.
The reasons people buy or sell can be related to inflation and the economy. Anyone who has ever invested money in stocks knows how many other factors play a role: politics, coincidence, psychology. “What concerns the markets?” ask the authors of the handbook. “All!”
Successful investors understand how events influence the way market participants think. The handbook authors name two basic rules:
“Political exchanges have short legs,” the authors of the handbook follow. “Financial and economic crises have long legs.”
Choosing the right stocks is the most important part of an investment strategy. All investors buy securities from which they hope to increase in value. However, you choose them according to different criteria.
Investors have four options:
The Investor’s Guide explains each of these strategies in detail.
Investors who want to make profits in emotion-driven markets without succumbing to emotions themselves need a clear strategy that addresses at least these points. In addition to choosing the right shares, this includes at least the following points:
“Without a strategy,” writes the investor book, “when investing in shares, chance often reacts, and wealth accumulation becomes a gamble.”
The book opens up a way out for anyone who, given the high demands placed on a strategy, fears never including it in their daily routine: So-called ETFs (Exchange Traded Funds) track indices such as the German Dax or the US Dow Jones . Investors invest in all the values contained therein at low fees.
Investors who can’t or don’t want to implement an elaborate strategy should invest in these ETFs and hold them for at least a decade, better longer. In this way, they avoid losses due to ill-considered decisions, but still achieve solid profits.
Profit from the movements on the financial markets. The basis for this is always a depot. Here you will find offers that suit your needs.
For decades, many stock markets have delivered average annual returns of around 6% to 8%. Before investors continue to assume these gains, they should consider the megatrends they have created: globalization, peace and population growth are fueling all businesses, technology and business are allowing some industries to grow rapidly while others disappear.
Investors looking to make long-term profits should get on the right side of these trends. Otherwise, they suffer similar losses as someone who invested everything in a typewriter manufacturer in the 1980s. When trends such as globalization and population growth come to an end, they should also reconsider the promises of growth they have created.
Even those who have read this overview can still learn a lot from the investor handbook.
The Big Handbook for Successful Share Investors is a comprehensive, intelligent and well-written book – an absolute buy recommendation.
