15 Investing Rules for Advanced Stock Buyers

The journey to building a market-beating portfolio is a process that looks different for every investor. Your particular investment strategy, risk tolerance, stock preferences, and long-term investment goals will greatly inform the type of portfolio you construct.

While these specific factors vary from individual to individual, there’s no debating that the most powerful, sustainable approach to achieving investment wealth is to invest for the long term.

If you have several years of investing experience under your belt, the following investment rules may not be new to you. But in this turbulent market period, even experienced investors are feeling uneasy. Investing can feel like a complicated game of chess at times, and sometimes, you just need to clear the cobwebs and get back to the basics.

Let’s dive right in.

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The market is by nature both repetitive and unpredictable. Periods of market downturn can and will happen, and they're just as often followed by long stretches of market highs, but no one can predict these windows with absolute certainty.

Trying to time the market as a means of informing your investment decisions is undoubtedly one of the fastest ways to do real harm to your portfolio. Attempting to time the market can both restrict your portfolio’s ability to grow and leave gaping vulnerabilities that put your holdings at serious risk the next time the market corrects or crashes. It’s also one of the easiest ways to lose money trading stocks.

On the other hand, a well-reasoned long-term investment thesis will propel you to make sounder decisions that better serve your portfolio and help you pursue its optimal performance. No investment is entirely risk-free, but a long-term strategy can certainly help you to reduce the level of risk you acquire.

And investing regularly in companies that you know, understand, and believe in -- and that can provide long-term growth and/or value to your basket of holdings -- enables you to drive consistent portfolio performance in a broad array of market environments.

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In times such as those we’re currently living in, where inflation is rising and whispers concerning another market crash abound, it’s easy to let emotions influence your investment choices. But highly charged emotions rarely serve investors well. Not only can emotions like panic lead you to sell stocks at a loss, but you might also be tempted to buy stocks that aren’t aligned with your long-term portfolio goals simply because they’re trading cheap.

Take time to sit back and clear your head if emotions are running high right now. If you have the cash flow to work with, use this window of market uncertainty as a prime opportunity to buy premium stocks on sale and load up on more inflation-resistant buys.

It’s easy to dwell on past mistakes in your investing journey and let them hold you back when you’re buying new stocks. But the reality is that no investor is perfect and no stock is entirely without risk. Don’t be afraid to make mistakes as an investor -- they can and will happen. Learn from them, apply them to future buying decisions, and keep investing.

In a time where stocks are particularly volatile and trends like meme stocks continue to lead the headlines, it’s tempting to follow the hype. Not all hype-driven stocks are bad buys, but it’s important to evaluate any potential stock as you normally would and determine whether the company is a high-quality investment that fits in with your larger long-term investment goals and risk preferences.

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A long-term investment strategy that implements portfolio diversification is key to achieve and maintain robust returns. As you buy more stocks and share prices of existing holdings shift, so will the composition of your portfolio.

You may find that you need to adjust your portfolio makeup from time to time to keep in line with your investing objectives and avoid overconcentration on a particular investment or stock sector.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

In the age of meme and Reddit stocks, the popularity of high-risk, high-reward stocks can be a tempting trend to follow. While there are certainly quality picks that qualify as risky but potentially very rewarding buys, you don’t need to buy these types of stocks to achieve optimal returns in your portfolio.

For example, a collection of low-volatility, high-caliber growth, value, and blue chip stocks in resilient sectors can drive serious returns over the long run and keep your portfolio stable in periods of market downturn.

Keeping up a stable habit of investing in high-quality stocks in a variety of market conditions will serve you far better over the long run than trying to predict the market or attempting to win the short-term investing game.

With a long-term buy-and-hold mentality, you’re far more likely to consistently produce wins over the course of your investing journey because you’re not betting on near-term market movements or precarious investing trends as a means of generating portfolio returns.

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Owning a diversified basket of stocks is important to avoid overconcentrating your holdings, and it’s wise to rebalance your portfolio on a regular basis to ensure the structure of your asset allocation is where you want it to be. But when it comes to investing, you should never choose quantity over quality.

Each stock purchase you make should be well reasoned and well researched, and fit in with the broader purposes you’ve set for yourself and your portfolio. At the end of the day, it’s better to have fewer stocks that are high-caliber and can produce long-term, consistent portfolio returns than a bloated portfolio of mixed-quality stocks.

While the weeks and months following a market crash can present excellent opportunities to buy top stocks on sale, there’s no debating that a downturn is tough on even the most seasoned investors’ nerves. And when your holdings look to be circling the drain, the temptation to hit the “sell” button is totally understandable.

But in most cases, selling during a market correction or downturn is one of the worst things you can do and a surefire way to sell at a notable loss. Even a rock-solid portfolio might have some days or weeks of less-than-optimal performance in the aftermath of a market crash.

Whenever the next market crash or correction comes, try to stay calm, and if you have the cash to invest, keep pumping it into high-quality companies that you’re committed to keeping in your portfolio for the long term. If you’re worried that emotions might cause you to make an unwise investment, hold off until things calm down before you start buying stocks again.

Generating wealth-building returns through the stock market doesn’t require genius-level investing chops or even tons of start-up capital.

The seeming allure of short-term investing is that it offers investors a chance to get rich quick on speculative buys that could spike their returns into overdrive. Of course, the reality is that few investors achieve and maintain wealth this way and far more individuals lose money through short-term investing than make it.

Achieving true wealth through the stock market won’t typically happen in a few days, weeks, months, or even a few years. However, a decisive, persistent pattern of investing in top-notch companies in a variety of industries and that bring various growth opportunities to your portfolio can help you achieve and build upon this goal over time.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Fear and panic are emotions that are talked about frequently in the context of market volatility. Greed is perhaps less often discussed as a serious liability for investors, but letting this emotion guide your stock buying can result in just as rash, potentially portfolio-damaging investment decisions as fear or panic will.

In periods of market volatility or in the aftermath of a market crash, there’s no question that emotions among investors run particularly high. And the bevy of bargain stock buys that typically accompany these market movements can be incredibly attractive from an investment perspective.

Long-term investors with cash to spare should absolutely continue to capitalize on strong buying moments in all kinds of market situations, including bargain opportunities for quality stocks. Just remember that a cheap share price isn’t in and of itself a sign of a good or bad company.

Making investing decisions based primarily on your emotions in the moment will almost certainly cloud your judgment and could even cause you to introduce some rotten eggs into your basket of stocks. When investing in an emotionally fraught environment, proceed with caution and continue applying your long-term investment strategy.

ALSO READ: This Low-Risk Stock Is a Long-Term Winner

We’ve already talked about how essential diversification is to a successful long-term investment strategy in a previous slide. The way in which you diversify your portfolio is a singularly personal choice, and there are many ways to accomplish this goal depending on your specific investment strategy.

Some investors prefer to focus their portfolio on stocks that are undervalued by the market at large, while others prefer companies that continually achieve above-average earnings growth compared to their industry peers. Still other investors like to focus primarily on dividend-paying stocks that provide a mixture of growth and value, as well as extra cash flow, to their portfolio.

Many of the most well-known investors that have generated serious wealth through the stock market have implemented a diversification pattern that uses all three of these strategies.

Asset allocation is another key factor that will impact the rate of returns you see in your portfolio, as well as its overall resistance to volatility in the market. It’s not at all unusual for the way you structure your holdings to change as the years go by as you fine-tune your investment strategy and objectives.

Change is a normal part of the investing journey, and as you get closer to retirement, you may tend to prefer putting more conservative eggs into your basket of stocks and reducing your collection of higher-risk investments.

A balanced portfolio is just as important as a diversified one. And what constitutes a balanced portfolio for you might look very different for someone else. Make sure you consistently check your portfolio to see if it needs recalibrating or if it still reflects the level of risk and returns you’re currently targeting.

After turbulent market events during the pandemic, investors are looking for stable investments that can provide safe harbor in the storm when another downturn comes. There are many types of stocks to buy that cater to every kind of investor.

Companies with a healthy track record of growth in a range of market conditions that provide products/services driving continued demand in all manner of economic situations are the kinds of resilient buys that can maximize your portfolio wins even when the market is down.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

The market has experienced some significant changes over the past year, but the fundamental rules of long-term investing haven’t. By investing for the long term, you’re not only more likely to ride out ups and downs in the stock market with greater ease, but your focus should shift to high-quality investments that can drive continual returns for years to come rather than over a period of just a few days, weeks, or months.

As Warren Buffett says, “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”

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