dimitrig said:
5. Focus on the long term
I started investing while I was in high school (Janus Mutual Funds) and I have never sold a position based on what the broader market was doing. I have, however, added to positions when the broader market sentiment was down and took quality names down with it. As I told a coworker once when the Internet bubble popped and my portfolio took a 50% haircut: "The goal is to buy low and sell high, not buy low and sell lower." It took 7 years to recover from that, but it did recover and then some. To me that was a bigger lesson than some Black Friday selloff.
Yes, the goal is not to "buy low and sell lower".
I would strongly suggest that what's more important is what you do WITH YOUR LOSERS.
No where in your 5 talking points on investing explains what you do with your losers.
The reason that I bring this up is, is because while you waited for 7 years for your account/portfolio to
recover from the Dot-Com collapse, the fact of the matter is that it took
17 years for the S&P 500 Information Technology Index to finally break the record it set back in March 2000. - - - Moreover, a ton of those companies are no longer around.
There is a
learning curve when it comes to developing a successful methodology to being an investor.
And your risk/reward ratio is only as good as your ability to execute your methodology.
Figuring out the best methodology for your goals takes time.
It doesnt just happen overnight.
In fact, I would place far more importance on your #2 and "knowing what you own" than your #5.
#5 can literally kill you.
Knowing what you own really should be the relevant question here. In fact, it should be the preeminent question here. Because if you own a company or companies that arent able to grow and have a management team that can execute, then it doesnt matter how many times you average down and keep buying their shares. You're going to wind up with a substantial portion of capital deployed in a company that isnt going anywhere.
Knowing how to identify your "losers" and what you do with them should be the single biggest component of your investing methodology. It can help you stay in the game and avoid large drawdowns that literally have you "frozen" for years.
"Cults don't end well. They really don't."