Don’t Accept a Tip without Research

Never accept a stock tip without researching a company on your own. Long-term success requires thorough research.

Resist Low-Priced Stocks

Some people mistakenly believe low-priced stocks are less risky. Whether a $5 stock dips to $0 or stock worth $75 does it, you lose your complete initial investment in both cases. Low-priced stocks may be riskier than high-priced stocks because they are not equally regulated.

Own Stocks of Significant Potential

Hanging on to stocks which, despite increasing by many multiples, have the potential to grow is necessary to be successful at investing in stocks. It works even if such stocks are in small numbers. Considering a stock on its own merits is important.

Don’t Panic About Taxes

As an investor, you should be concerned about tax liability, but don’t stress about it and end up taking misguided decisions. Try your best to minimize tax liability without changing your primary goal—high returns.

Choose a Strategy and Stick with It

There are many ways to go about picking a stock, but sticking to one philosophy is essential. For instance, noted investor Warren Buffett stuck with his value-oriented strategy and didn’t take part in the dotcom boom of the late ’90s, helping him avoid major losses when tech startups crashed.

Focus on The Big Picture

It’s a better idea to focus on an investment’s long-term trajectory than its short-term volatility. Long-term investors’ success relies on their ability to think about longer periods spanning years.

Be Open-Minded

Companies that are household names may be great investments, but many small-cap companies could become blue-chip stocks in the future. Don’t include only small-cap companies in your portfolio, but do look beyond companies listed in the Dow Jones Industrial Average (DJIA).

P/E Ratio Is Not the End

Price-earnings (P/E) ratio isn’t the only metric you should be concerned about as a low P/E doesn’t necessarily mean a stock is undervalued. Use the P/E ratio with other analytical processes.

Sell a Losing Stock

A stock may or may not rebound after a decline. Be realistic about your poorly-performing investments. Selling such stocks helps prevent further loss.

Adopt a Long-Term Perspective

Large short-term profits can be tempting, but it is long-term investing that leads you to success. Short-term trading may make money, but it’s riskier than buy-and-hold strategies.