VectorVest Founder Dr. Bart DiLiddo writes in his classic little green investment book, “Young people have an invaluable asset on their side: Time. They don’t need to take risks. They can invest in tried-and-true companies that make money year-in and year-out.”
Whatever your age, you can become financially independent when you learn to invest in only the best stocks. Those are the industry leading, successful businesses that have consistent and predictable earnings, year after year. VectorVest makes it easy to find these babies, so why are so many investors missing out?
- Information Overload. Too much information can lead to indecision or worse, faulty analysis. Trusting the wrong sources or “tips” from the brother-in-law or stock promoters can lead to bad decisions. Solution: Rely on one trusted source. Vector purchases comprehensive financial data from FactSet and breaks it down mathematically into Value, Safety and Timing indicators on a 0-2 scale that can be force ranked to bring the best investment ideas right to the top of the Stock Viewer, WatchLists or UniSearch. Best of all, VectorVest gives you clear, objective, Buy, Sell or Hold ratings on every stock, every day.
- No Plan. Without a trading plan, you have no framework for decisions about when to buy, what to buy and when to sell. This wastes time and often leads to impulsive, inconsistent decisions that contributes to poor results and unnecessary stress. Solution: Write out your plan. First, know your Investment Style (read the Strategic Investment Matrix Report in Views Manager). Decide if you are you a Conservative, long term investor focused on capital preservation, a Prudent investor looking for a balance between safety and growth, or an Aggressive trader, seeking explosive short-term gains. Second, determine your financial Goals – are you looking for short term gains or long-term income. Knowing your investment style and financial goals will help you focus on which stocks to buy, when is the best time to buy them, and how tight or loose your Stop-losses should be.
- No Buy Trigger. If you don’t have a trade trigger or setup that you can rely on, you end up taking trades impulsively without having any idea if the stock is more likely to go up or down. You waste time when you don’t know what pattern or setup to look for, and you don’t give yourself a consistent edge. Solution: Know your entries. Only consider stocks that have the basic conditions or rules that must be present to even consider making the trade. Some examples: The market must be in an uptrend. The stock’s Price and Earnings must be rising. Price must be above a certain Moving Average. A fast MA has just crossed above a slow MA, called a Golden Crossover. MACD, Stochastics or another technical study has turned Bullish. The stock must have VectorVest’s Buy Rating. (see my essay on 8/06/21).
- Selling Too Soon. If you always set your Stop-Loss too tight or sell too early, sometimes even before your initial Stop is triggered, you will never get the big winners you need to make up for the inevitable small losers. Solution: Change your mindset. Just like Seinfeld’s George Costanza, do the opposite of what typical traders and investors do. That is, become OPTIMISTIC when you have a winning position, and FEARFUL when you have a losing position. With this mindset, you will be better prepared to let your winners run and even add shares to your best-performing positions. You will be prepared and committed to Sell your losers quickly when they hit your Stops and not even think about averaging down, a gambit our Founder Dr. Bart DiLiddo has described as “the worst thing and investor can do.” Remember this, over the long term, you only need a few big winning trades to make you profitable each year.
Evaluate your best and worst trades this past year. I think you discover your results would have been far better if you just eliminated the FOUR REASONS WHY PEOPLE MISS OUT ON BIG WINNERS.