Achieve financial independence & retire young by not being a lemming
The masses (Lemmings) are resolute in their belief that anything of value must be hard to learn or acquire; nothing could be further from the truth. One does not need to master intricate formulas or complex strategies to acquire wealth. You do, however, need Patience and Discipline. Patience and hard work have nothing in common; in fact, many impatient individuals are very hard-working, and they are forever getting clobbered when it comes to investing. On the same token, many patient individuals hardly work hard at all, yet they can consistently walk away with profits.
Now that we have covered Patience lets deal with the topic of Discipline. Discipline is the ability to stick to a plan regardless of what your friends, loved ones, experts or enemies are dictating. The only time one should even think of changing the game plan is one sees no results after utilising the plan. However, if you follow the simple rules we have outlined, the odds of that coming to pass are so remote that we are not even going to cover it.
If you have a decent job and are willing to live 1-2 standards below your means, you can build a very nice nest a lot faster than you think. And, then you can start to do things you enjoy as opposed to doing the things you were forced to do, in order to put food on the table. Retirement does not mean sitting on your backside and doing nothing; it should equate to doing what you love to do as opposed to doing what you hated to do in order to make a living. To do what you love doing, you need to get off the 9-5 schedule, and the only way to do that is to be in charge of your destiny. And to be in charge of your destiny, you need financial independence.
The first step to achieving this is to gain mastery over your emotions. You need to stop following other lemmings (the crowd). You need to be resolute you in your decision and stick to the game plan. When the crowd panics, you should celebrate and when they panic celebrate you should panic.
You have to gain control of your emotions, and you need to work at it, for success won’t come overnight.
Every time you are angry and about to make a rash decision, regardless of whether it concerns the stock markets or not, try to put off making a decision till you have calmed down. This is the first step in gaining control of your emotions. When your emotions do the talking, your money does the walking, and it usually walks away from you into somebody else’s pocket. Master, this phrase, buy when there is blood in the streets and run for your life when the lemmings are celebrating.
Educate yourself: you need to spend the time to understand the game you are playing. So make a list of what is important to you in terms of investments. What do you like, High Tech stocks, food stocks, biotech stocks, health-related stocks, internet stocks, etc.? Then spend some time finding the leaders and a few new emerging leaders. How do you do this? You should have one of the two criteria; the first one should be high quarterly earnings or revenue growth rates. The second criterion is that the company should have an exciting product that is not easy to duplicate. It is easier to find companies meeting the first criterion. All you need to do is go to yahoo finance and type in the symbol under the section titled Key Statistics. Here is the direct link and for information purposes, we have selected the stock IRMD. https://finance.yahoo.com/q/ks?s=IRMD+Key+Statistics. The image below shows you how to change the symbol if you want to look up another stock.
You should be looking for quarterly earnings growth rates or revenue rates more than 10%. Here is a very simple yardstick;
15%-20% = Good
25%-40% = Very good
50% plus = Excellent
However, unless you are already familiar with some fast growing companies, the above process could be cumbersome. Most individuals will need to find a good stock screener. Finviz is a site that provides a fairly robust stock screener, and it has both Fundamental and technical analysis screening tools built in.
There are many screens you can choose, but the one we highlighted is the one that allows you to select EPS growth quarter over quarter, which matches the criterion we listed above. You can then take the list from this search and manually go through each of the symbols by inputting them into the key statistics page of Yahoo Finance if you want to further narrow your search. Alternatively, you can fine tune your criteria by selecting additional requirements.
Now that you have your list of stocks, you need patience and discipline. You wait for strong pullbacks in the corresponding stocks before deploying new capital into them. Regardless of what the experts state, there are always sectors that will experience a strong correction, you just need to be patient. Once the sector corrects, you need to remember the adage we mentioned before “panic when the crowd is happy and jump for joy when the masses are panicking”. The other option is that you wait for the entire market to pull back strongly. If you look at any long term chart, you will see that the markets experience at least 1-2 small to medium corrections a year; the stronger the correction, the better the buying opportunity.
Portfolio management and stops
It is essential that you employ stops, just in case the trade does not work. A stop helps to prevent you from being blown out of the water and gives you the chance to redeploy your capital into another strong company. Please read this section thoroughly Portfolio Management.
While not essential, it can significantly help you in timing your entry points. Forget about trying to time the exact top or bottom that is an exercise for fools. Introduction to Technical Analysis will provide you with some ideas on where you can begin your journey if you decide to embrace the field of technical analysis.
Key factors to remember
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