7 Investor Rules That Helped Turn Thousands into Millions

Every investor wants to turn thousands into millions. Making this type of gain in the stock market IS certainly possibly. But it still takes knowledge, skills, and the right mindset to accomplish such a feat. Instead of going after this accomplishment on your own, it’s best to look at what successful people have done before you.
So today, we’ve listed 7 rules that investors use to turn thousands into millions.

7 Investor Rules That Helped Turn Thousands into Millions
7 Investor Rules That Helped Turn Thousands into Millions

Rule 1. Invest For The Long Term – The Best Way to Turn Thousands into Millions

Even when day trading, long term investment strategies are vital for success. It’s not just the strategies either, it’s a whole mindset. When stuck on the idea of getting rich quickly, people often act as if making money on stocks is a race, instead of a journey. Some of the world’s best investors, such as Warren Buffett say their success was founded on long term strategies.

Rule 2. Invest In Brands And Businesses You Believe In

When you’re looking at investments, don’t jump on trends that are short lived. Instead, focus on brands and businesses that you believe in. One easy way of doing this is to act as if you’re buying the business (because you kind of are!).

Rule 3. Break The Rules

While there are always companies that are considered “safe” for investments, if you’re really trying to get a high return on your money, take some risks. A small forward thinking company can bring you higher returns than a large stable company. Higher returns will bring you much closer to your goals than the “safe” investments.

Rule 4. Cut Your Losses

It might sounds easy, but for many beginning investors, it’s hard to cut your losses. After all, you just spent so much time learning about a company, becoming convinced it’s going to do well and then, watching that prized stock drop in value. Instead of holding onto it, convinced that at some point it will return to its former glory, take a deep breath and cut your losses. Acknowledge that you made a mistake, ask yourself where you went wrong, and try to learn from the experience.

While you can set your own numbers in advance of investing in stocks, the general rule of thumb is to sell stocks when their down 7% from the purchase price. This will help you avoid a drastic plummet impossible to come back from. A 7% loss can be easily made up in your next stock purchase, but if you let your stock fall too low, you won’t be able to recoup your money.

Rule 5. Treat Trading Like A Business

While there are risks to investing, you should still treat it like a business. Learn about the stock market and sectors of the stock market. Create a game plan for how you’re going to go about investing and create rules for yourself that you’ll stick by. If you have the money and time to invest in a mentor, do so!
Whatever you do, don’t jump from strategy to strategy or write off mistakes as “no big deal”. Master a strategy, learn one thing well, and stick to your planning.

Rule 6. Only Make Risks You Can Afford To Make

Perhaps the biggest mistake a new investor can make, is investing money they really can’t afford to invest on the premise that they’re going to get rich quick. You’ve probably heard this a million times, but if you can’t afford to lose it, don’t invest it. When you see big players talking about their success, it’s tempting to want to throw caution to the wind, but remember that investing is a long-term strategy. If you want to safely make cuts to your budget to invest, try to cut out some of the little luxuries, like your morning coffee. Yes, morning coffee is amazing, but making it at home will save you a few dollars that you can put into the stock market.

Rule 7. Analyze The Market

One rookie mistake is to focus on individual stocks instead of market sectors and the market at large. Understanding the market as a whole and the market sectors you plan on investing in will help you avoid huge losses. For instance, the marijuana market was on the rise for quite some time. However, when new marijuana laws were put into place, stocks such as the CBDS stock, started falling drastically. Investors who understand the market and market sector would have had the best chance of minimizing damages, compared to those who were just watching the individual stocks with no understanding of the industry.

While investing in the stock market isn’t necessarily an easy way to make money, it very well might be the easiest way to make millions from thousands. This is especially true, if you set yourself up for success by following these 7 investment rules.

( Photo by David Paul Ohmer )

4 Responses to 7 Investor Rules That Helped Turn Thousands into Millions

  1. Let me just add timing is important too. While it’s hard to be opportunistic when the market is melting down, bargains are had when there’s blood in the streets.

    Conversely, the S&P 500 bottomed on March 5, 2009. That’s over 9 years ago We are now in one of the longest bull markets recorded. I’m not a fear mongerer, but having cash for some major pull back feels very good to me.

    Great investing rules Kevin!

  2. They’re not mine Ian, they’re Gary’s, but I like them as well. I have to agree with you about timing though. You have to be willing to buy when most are selling (ie, 2009) and selling when most are buying (now will probably prove to be an outstanding example), and that’s where the biggest rewards will be. But I doubt one person in 100 has the courage to do that. That said, I’m seriously beginning to wonder if the Federal Reserve now has more power to keep bull markets going than we generally assume. If that’s true, then this bull market could go much longer than fundamentals would suggest.

    For example, given the current levels of debt the natural course would be for interest rates to be much higher due to greater demand. But they’re not. So something else is at work. We still have interest rates at near Depression levels, which seems to be an artificial construct. As long as the Fed can keep a lid on interest rates (the current mostly-symbolic quarter point increases notwithstanding), the market will probably continue higher. Until it doesn’t.

    As you can see, I’m no wellspring of definite advice.

  3. Kevin, I think you are right when you say “something else is at work”.

    Modern economic theory seems to be based on votes, and not on sound financial principles. Also, no one seems to think that borrowed money needs to eventually be paid back.

    If the government has more debt than they can manage, AND they control interest rates, the easy road is to keep rates artificially low. At some point I wonder if that stops being just the easy road, and becomes the only road.

    Downturns are a natural part of economic cycles, but the current mindset seems to be to avoid (or ignore) that at all costs.

    On a more cynical note, perhaps policy makers are not as altruistic as they used to be.

  4. Hi Neil – There are so many reasons government will want to keep interest rates artificially low, enormous debts being just the most obvious. More significantly, they help to keep the appearance of low inflation. But you make an important reference to policy makers. The financial markets are driven more by policy than economics. That’s why I say it isn’t a natural market, and previous rules can’t be relied on, at least not until they reassert themselves. They will eventually, but the policies are so all-encompassing as to make reality look like a relic from the past.

    The ETF phenomenon is curious to me. With it, and index funds in particular, people aren’t even investing in stocks, but in markets. It’s as if stocks themselves don’t matter. Of course, we know that can’t be right. But in the recent market environment, they make perfect sense. Why search out strong companies when you can invest in markets that are in a multi-year elevator ride up? Low interest rates continue to fuel that climb. Rates may be rising incrementally now, but watch and see as soon as the market takes a hit, the Fed will begin cutting in short order.

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