Media usually makes you believe that stock market investing is a lot more complicated. In reality, if you apply a consistent approach that follows a few key financial principles, it can be very simple. These principles involve prudence, long-term thinking, and diversification.
One of the most popular types of investing is certainly growth investing. Growth stocks oftentimes run faster than the market, and if you become good at it, you can earn triple-digit returns in a relatively short amount of time. If you would like to learn more about growth investing, you have come to the right place. Read this guide to learn about 6 useful tips about investing.
- Go for the fast-growing companies
There are so many companies in today’s economy because the population is growing, and the market’s demands are larger than ever. The smartest move you can make in growth investing is to invest in fast-growing companies. This is a tactic that some of the world’s biggest investors such as Louis Navellier use. They focus on these kinds of companies because they know they will bring the most profit.
So, you should research which are the fast-growing industries of today and think about which one could be interesting to you. While you study the stocks in these industries, make sure to take into consideration the lesser-known stocks. These kinds of stocks are good to focus on, as they are still waiting for their point of peak perception. And it makes perfect sense – the smaller the stocks, the greater is their growth potential.
- Focus on the stocks with strong RP lines
A smart thing to do in growth investing is to focus on the stocks that are consistently outperforming the market. The way you can do this is through relative performance (RP) studies. These studies can allow you to find successful companies to invest in, and avoid the ones that are not so successful. You will be able to identify the companies that are succeeding week after week, month after month. And of course, with such a pattern in their performance, these kinds of companies will be the ones truly worth investing in!
- Remember that market timing is important
Another very important thing to remember is that you should pay attention to the market timing. You should use it to guide your growth investing. Pay attention to the market, and when it moves the stocks, both up and down. When the trend is up, the stocks will be going up as well. This is the time to buy stocks. Make sure to hang on to them as long as they are profitable. If you see a change you do not like, do not wait to make a move.
- Have patience
Even though those Wall Street professionals make the stock market look more complicated than it is, they are absolutely right about one thing – it takes so much patience. To make great profits, you must trust time and be patient with your stocks. Sometimes they will not go up as rapidly as you expect them to. But, that does not mean that it will not change later on. So, make sure to work on building a tolerant and persistent attitude. It might be hard to wait, but the result will surely make it all worth it.
- Try to cut any losses
To ensure that you are retaining enough capital, you have to always try to cut losses short. Even the most experienced professionals sometimes make mistakes, so do not worry if some of your stocks go against you. The key is to get rid of them as soon as you can. To make sure you are staying in the game, try to sell them before your loss exceeds 20% of your original money invested. If you ignore this rule, you might suffer great losses, and will probably not be able to invest anymore. Many people have made this mistake, so make sure you are learning from them, and not following their example.
- Know when to sell
Once you see one of your stocks growing for a long time, make sure to sell it once it loses that positive momentum. Once this happens, the other investors are probably selling as well. This usually happens if a company is facing a downfall. So, do not wait for them to tell you the bad news. Instead, act on time, and leave with the highest amount of profits possible.
Growth investing can be a great way to earn capital. But, to be able to do so, you must make smart decisions and constantly follow how your stocks are doing. The market will have many ups and downs, but you have to make sure to stay optimistic and always keep your patience levels high!