Tips to know about investing

For any investor whether beginning or more experienced, there are certain tips that can help you better navigate the world of investing. These tips can help you avoid many of the common pitfalls that keep other investors from making money. Here are some tips to know about investing-

• When you invest, you are making a choice- It is important to understand that if you buy stocks, for the short term, you're not an investor. If your time frame is measured in months, rather than decades, you're not an investor. If you don't know in detail, the underlying fundamentals of a business, and its financials, you're not an investor. Keep in mind that this doesn't mean you can't make money. It just means you're playing the game, not the odds. As an investor, you are making a choice. You are making a commitment to ignore the seemingly easy money of the "hot" stock (which might not be so hot), in some business you may not understand, but that didn't seem to matter much anyway, because you were just in it for a quick profit.
• It really is a market, just like the grocery store- Investors need to understand that while all stocks react to the same outside influences, such as economic growth, interest rates and exchange rates, each individual stock reflects the valuation of an individual company, and each company has its own unique risks, and opportunities. This means that individual stocks should be considered on their own merits.Investing expert's state that they pay not attention to where the market is heading overall, and neither should you.
• Understand that there is a lot of "ifs"- The reality is that stocks offer better potential returns than bonds or cash, if you buy them for the long term. Time can be your greatest ally if the companies, you own have predictable growth. Predictable long-term growth is rare, but attainable if your companies have sustainable competitive advantage.
• You must determine where your competitive edge is when investing- Great businesses all have one thing in common: They each maintain an advantage over their competitors. This advantage is the source of their success. It is what separates great companies from the host of pretenders. One of the most important types of competitive advantage is a cost advantage. This means that a company operates more efficiently than its competitors. The other major category of competitive advantage is a quality advantage. This means that if a product is truly better or even thought to be superior, consumers will pay more for it. You should keep in mind that finding a business, with a competitive advantage is not enough. You will also need to determine that its advantage is sustainable. Be sure to ask yourself if the company has a lower cost structure, is there a way that its competitors can catch up? If the company has a superior product, can the product be duplicated?
• Focus on having the courage of your convictions- There are a couple of reasons that this can help you with your investing. If you focus on great companies you can have confidence, when the news is anything, but reassuring. You can give these companies the benefit of the doubt. In addition, if you invest a certain amount every quarter or every year (known as dollar cost averaging), you will automatically be buying more shares, when stock prices are low, and fewer when prices are high. You will need to decide how much of your savings, you want to invest in stocks, and how much you are comfortable adding each year.