Recently, someone I follow on Twitter wrote a blog post about
mid-year investing resolutions. It got me thinking about how we
only vow to do things in January and then often forget these grand
plans well before the mid-way point in the year.
I didn't write a traditional new year's investing resolutions Cabot
Wealth Advisory this year, but in January, I offered 20 tips to
becoming a better investor that I gathered from the wisdom of our
Cabot editors. And they are still relevant and important today,
especially in the midst of a volatile market.
So instead of waiting until next January to resolve to become a
more successful investor, I invite you to read the following
investing tips and incorporate them into your system. It's never
too late to get on the right path!
1. Cut losses short (definitely rule #1 for growth stock
2. Search for strong sales and earnings growth (especially
triple-digit sales growth).
3. Search for revolutionary products with major benefits.
First Solar and Crocs filled the bill in 2007 and were Cabot's two
biggest winners. Earlier this year our subscribers benefited
from Green Mountain Coffee Roasters' revolutionary Keurig
single-cup brewer. And the booming Chinese Internet market with
4. Heed the message of the overall market--never fight the
5. Never average down in growth stocks.
6. Be prepared for all contingencies (always have an exit
plan ahead of time).
7. Never try to buy at the bottom or sell at the top (if you
try, you'll just lose more money).
8. To avoid gut-wrenching volatility, stick with stocks that are
liquid (at least 500,000 shares traded per day or more).
9. Only put more money to work after your past purchases are
showing you a profit.
10. Be humble--making money in stocks is tough, so don't kill
yourself over one or two bad trades. Be thankful when you hit a big
11. Find an investing system that works for you. The best way to
deal with stress from the market is to have a game plan ahead of
time. If you wait until things are blowing up in your face, it's
too late--by then, your emotions are out of control and you're
likely to do the exact opposite of what's constructive.
12. "Markets are never wrong; opinions are," is a quote from Jesse
L. Livermore, one of the most colorful, flamboyant, and respected
market speculators of all time. At Cabot, we agree wholeheartedly
with his comment and truly embrace this thinking. And you should,
too, if you want to become a successful growth investor.
13. When looking for potential purchase candidates, examine both
the company's fundamentals and its stock's technical performance.
When analyzing the technicals, focus on the stock's momentum and
price chart, along with its volume pattern and 50-day moving
14. Find a company that has a big idea ... one that leaves few if
any limits on its future growth potential. It's these big ideas
that create an atmosphere that can push a growth stock to dizzying
15. Warren Buffett once said there were only two rules to follow
with your investments: Rule #1: Don't lose money. Rule #2: Don't
forget rule #1.
16. Our goal is to get you heavily invested while the market is
trending higher. During those times, when investor perceptions are
improving, investors are willing to pay more and more for stocks.
This is when you can make big money! But, of course, no market
moves in one direction forever. So, when the intermediate-term
trend of stocks is down, your best move is to play defense. Easing
up on new purchases, while building up cash by selling your weakest
stocks, is a good idea.
17. Be an optimist. In our more than three decades of publishing
investment advisories, we've seen many ups and downs for both the
market and our country. But after every tough event our dynamic
country and economy have eventually rebounded. So no matter how
bleak the situation, always stay optimistic because our country and
stock market will give you some dazzling opportunities!
18. Diversify your portfolio. For our Model Portfolio in Cabot
Market Letter, 12 stocks provide plenty of diversification for your
growth portfolio. Smaller investors can do well with as few as five
stocks, but you should never have all your eggs in one basket.
19. Once you've invested in a stock, be patient. Recognize that
time is your friend. Frequently stocks don't go up as fast as you
might want them to. But if you can develop a persistent and
tolerant attitude coupled with plenty of patience, you'll have a
great advantage. We call this STAYING POWER!
20. Buy growth stocks with strong RP lines. Relative performance (
) studies are a superb way to identify successful companies and to
avoid problem companies. You should buy stocks that are
consistently outperforming the market. This is a good indication
that they are under accumulation, week after week, month after
month, and that the companies are succeeding. The best investing
tips come from the performance of the stocks themselves. So ignore
I hope you benefit from reading these tips and incorporate them
into your own investing system. Don't wait until January to resolve
to come a better investor; the time to start is now.
Until next time,
Editor of Cabot Wealth Advisory