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Use this one step to help you beat the investing pack

by , 28 May 2014

Any decision you make when it comes to your investments should follow a clear plan. Unfortunately the vast majority of investors make investment decisions without a plan. They just do it, with no or little methodology behind their decision. But if you can apply a clear plan to your investments and stick to it, you're in a far better position to profit. Let's take a look at how to achieve this…

The majority of investors sell at the wrong time

In a study conducted by Barron’s, they showed that 85% of decisions investors make about selling or changing holdings are wrong. Yes 85%!

The reason is this, Sid Riggs in Money Morning US explains…

When the market starts to fall, investors get scared. This leads them to sell their shares. They usually do this at or very close to the bottom, when investors are at their most pessimistic.

Once they sell their positions, they put their money into something safer. By doing this, investors tend to miss out on the start of the market rising. These investors aren’t then sure when to invest in shares again. They become scared to take on any sort of risk.

This is an extremely common problem. And if it’s something you’re guilty of, don’t despair. You can stop it happening again.

How to stop falling prey to market fears

Before you buy any share you need to have an exit plan in place. And that’s if the share price rises or falls.

For instance, you could use a trailing stop loss. This means if the share climbs higher for so long then starts to fall, you’ll still capture most of your gains.

You can read more about trailing stop losses here.

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And when the market is pulling back a bit, use this time to look for companies that you want to buy and do some research. There may some fantastic companies out there selling at inviting prices.

You may be scared to start buying when the market is at the start of an early recovery, but the likes of Warren Buffett have shown that this strategy can pay off. Use the market’s volatility to your advantage.

So there you have it, one step to help you beat the investing pack.

Use this one step to help you beat the investing pack
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