Stockmarket takes off but you need to keep Grounded

It's easy to get carried away with success in the stockmarket. But the most important lesson you can learn is how to keep your feet on the ground. Investing in the stockmarket can be very safe over the longer term (10+ years), but that does not make investing any easier. Investing in the stockmarket is a positive game. Understanding this shows why investing n the stockmarket is a much better investment then a negative game (horse racing, cash, etc).

Here are two principles that should be used for successful investing that can win in bear markets where you are clawing to get gains as well as when the bulls are running strong.

1. Very boring companies often make great investments.
Banks for example are very boring shares. But most banks charge an arm and a leg in transactions and are therefore great investments. They don't do anything exciting like find medical cures or large ore deposits and this is why their share price does not jump up dramatically ( but it doesn't usually decline rapidly either).

2. Look for Earnings growth and Reasonable Price Earnings
Investors should look for solid earnings per share (EPS) growth and a low price earnings ratio (PER). The PER is an indicator of the market's perception of a stock. It is calculated by dividing the share price by earnings per share - and is expressed in multiples of a year's earnings.


Good Luck Investing.