How to Achieve a High Return in Stock Market

1. Understand What You’re Investing

Most investors think that the stock market is a risky investment, no it is not & yes it is. For those who don’t understand what the stock market is, or what investing is, this is risky. But for investors who understand about their investment, this is not a risk. Risk comes from not knowing what you’re doing.

This is a straightforward rule but very few people follow. As investors, we need to understand the company that we’re investing in. When we look at some great investors like Warren Buffett, a lot of the companies that he owns are easy to understand. These companies’ business models are straightforward & simple to understand.

Coca-Cola has been his holding for the last four decades. They sell soft drinks all around the world. Apple is a company that sells iPhones, iPads, Mac books & other Apple products & services.

Before you buy a stock you need to understand its business model first. How do they generate money? What products do they sell? Who are the competitors for their business?

2. Buy & Hold

The most common mistake made by many investors is they invest in the stock market for quick returns. They want to double their investments within the next couple of months. This is not the way to invest your money. You have to let compound your investment for the next coming years. Compound interest is so powerful. When you get dividends or capital gains & you let that compound on itself & grow like a snowball you can make a lot of money.

But if you’re constantly buying & selling stocks you’re not letting compound interest do its thing & you will miss out on a lot of returns. Never interrupt the compounding engine. All you have to do is buy some great investments under its intrinsic value & wait for compound interest to do its work.

When it comes to Warren he has owned Coca-Cola for the last four decades.

“If the job has been correctly done when a common stock is purchased, the time to sell is rarely.”

Philip A. Fisher

3. Avoid the Noise

When it comes to stock market investing you get to experience a lot of news about stocks. Some news are positive & some are negative. When investors hit good news they buy the stock immediately & when they hit negative news they rush to sell them. This is not the way to do value investing. Almost every news that you consume is not necessary when it comes to investing.

“Owners of stocks, however, too often let the capricious & often irrational behavior of their fellow owners cause them to behave irrationally as well. Because there is not much chatter about markets, the economy, interest rates, the price behavior of stocks, etc. Some investors believe it is important to listen to pundits & worse yet, important to consider acting upon their comments.”

Warren Buffett