Some of the best stock market investing advice you can get will come from those who have been there and done that.
One of the most successful investors of all times is legendary investor of Berkshire Hathaway, Warren Buffet. Mr. Buffett “Diversification is for the ignorant.”
You are taught all the time by main street “gurus” that diversification is the key. Most people invest their money in a mutual fund (a very diversified way of investing) and are happy to make 10% per year. At that rate it will take over seven years just to double your money!
Diversification will DILUTE your earnings (as well as your risks). I like to make 100% in one year and to do that you can not diversify. As an example, I have a trading strategy I use where I invest in only one stock for one week. I then take all my funds and roll it over into the next weeks stock pick. At all times I’m in only one stock and I compound my money 52 times a year. That should show you how diversification reduces returns.
The reason most people diversify is because they don’t study their stocks and they want some protection in case they are wrong. That is a terrible way to invest. You should not be investing in a stock unless you are 100% sure it is going to go the way you predict. If you have any doubts, you should pass on the stock. There are other ways to protect from losses that don’t require diversification.
Author of “Rich Dad, Poor Dad”, Robert Kiyosaki, had this bit of stock market investing advice, “Don’t be average [when it comes to investing].”
In other words, think about what the “average” investor would do, then try NOT to do that. I have had a great deal of success with a little short-term strategy that follows this investing advice.
A few times a year when I’m certain investors have the markets all wrong, I look for a stock that will go up if the markets rise, and I look for a Contra ETF that will rise when the markets fall. I watch both at the opening on Monday. The one that investors are selling and opens below Friday’s close is the one I’m buying. Buy when others are selling and sell when others are buying.
There is also another belief that once a stock appears on the cover of a magazine, and everyone is yelling to buy, that is the time the stock will crash. While they are buying, you better be selling.