Intelligent investors should be short-term oriented and willing to risk more in the pursuit of much higher-than-average returns but are also willing to hold longer term if it maximizes profits.
Intelligent Investing is not:
1. Timing the market
If part of your speculation is based on a guess about what any market is about to do next is fundamentally flawed. What will move markets tomorrow or next week is tomorrow’s or next week’s news. We can’t know that now. And betting on the unknowable is gambling, not intelligent speculation.
2. Investing in things you don’t understand
Keep your fingers away from what you do not understand but invest in the things you know. If you are not an expert on cryptocurrencies, blockchain, angel investing or arbitrage then just pass on these categories.
3. Getting stuck in illiquid investments
Always prefer securities that are easy and inexpensive to trade, have plenty of volume/high liquidity) and have no surrender penalties. You should be able to exit any speculation on a moment’s notice and at a cost of no more than a few dollars.
4. Overestimating the potential of low-priced stocks
Is it easier for a $5 stock to go to $10 than it is for a $50 stock to go to $100? You can be sure that this is not the case. Plenty of research confirms this. But unfortunately, the same studies show that it is easier for a $5 stock to go to $0 than it is for a $50 stock. The share price of a stock tells you nothing about its upside potential.
These 4 major examples not to following if you want to invest intelligently. Avoid them and follow important principles that will dramatically impact positively your returns.
Sven Franssen