William O’Neil’s investment strategies have made him and others who follow his Investor Business Daily newspaper millions of dollars. In his book, “The Successful Investor,” he details five tactics he’s relied on for the over forty years he’s traded stocks. He says he wrote the book for the 80 million individuals who lost 50 to 80 percent of their savings during the 2007 to 2008 bear market.
The Successful Investor Determines Which Way the General Market is Going
O’Neil stresses the importance of not investing in the market until you know in what direction the market is moving. Using indices like the S&P 500, the DOW and the NASDAQ daily is essential. The author’s research documents that three out of every four stocks follow market direction.
O’Neil says that when the stock market turns – don’t stop looking for stocks. “Staying on the sidelines while the market is in a downturn is not the time to stop looking for winners,” states O’Neil. “Looking for the next winners gives successful investors the opportunity to know exactly what stocks to buy when the stock market turns around.”
The Successful Investor Uses A Simple 3-to-1 Profit-and-Loss Percentage Plan.
The author outlines a very simple plan for making profits. Profit 20 to 25 percent on 3 well-chosen stocks and cut losses at 8 to 9 percent when a stock dips.
Having a planned enter and exit strategy helps stock market investors keep profits and keep losses at a minimum. One of the biggest secrets most people who dabble in investments never learn is how important not only knowing when to buy a stock is – knowing when to sell is the secret to successful investing.
The Successful Investor Buys the Very Best Stocks at the Very Best Time.
This chapter discusses the importance of choosing stocks carefully. By using due diligence on each stock pick and learning how to read financial statements as well as stock graphs, investors will learn how to pick more profitable stocks and less stocks that lose money.
Cutting losses when a stock does not perform is key in successful investing. O’Neil states that the real success in buying stock is knowing when to sell it. “Don’t argue with the market, warns O’Neil, “you’ll lose. Learn to cut your losses and move on.”
The Successful Investor Knows When to Sell and Nail Down Big Profits While He Still Has Them.
O’Neil warns of the importance of not getting greedy. Having an exit point, or nailing profits down at 20 to 25 percent is key in keeping paper profits. Stocks almost never go straight up. They correct or dip in price.
Take profits at a chosen exit point then move on to the next winner. This is where successful investors know the research conducted on each stock will pay off.
The Successful Investor Manages Her Portfolio
O’Neil states this is the secret to maximizing results and minimizing losses.” The last chapter in The Successful Investor gives detailed information on how many stocks should be in a portfolio and how to systematically trim weak stocks to purchase stocks with more potential.
The book gives detailed information on how many stocks a $500, $5,000, $10,000, $20,000, or $100,000 portfolio should contain. The author warns both about overly investing in one stock and against being overly diversified or having too many stocks in the portfolio.
Successful stock market investing is a learned skill. Traders who stick to a winning investment plan continually win in the stock market, while investors who don’t stick to a plan continually lose. O’Neil advises finding a plan that works and sticking to it is probably the biggest and best secret to successful investing.