01 – Don’t lose money
As Warren Buffett said: “Rule nº1: Never lose money; Rule nº2: Never forgot rule nº1”.
02– Don’t buy stocks, buy business.
– Don’t look only for the price and ticker of the stock.
When you invest in a stock look at the business of the company, look at the potential, the profit… Don’t look only for the graphics, look for the fundaments and for all the ecosystem that involves the company.
Another thing is, when you invest (to financial independence/financial freedom and passive income) you need to understand what you’re talking about. You need to do the investing 101
A good way to do it is by being able to explain to others the reasons that have brought you to invest in those companies.
03 – Administrate risks, except those who can get you out of the game.
“Risk comes from not knowing what you are doing.” – Warren Buffett
However, there’s something you should never expose yourself to. Which is: the risk of ruin
Risk of ruin is the probability of an individual losing something, to the point where it is no longer possible to recover the losses or continue.
In investments, this can be related to penny stocks, for example. Stocks that are cheap and with “high reward potential”, but with high risks as well.
4 – Don’t Be Greedy.
– Well, we were able to found greedy people, for example, here in Brazil. There’s a stock called Mundial. Where 20 years ago this stock start growing 20% day by day. And people start thinking
5 – Be Patient
Best investment fund in 2000
The average investor lost about 11% annually
Because they were impatient, the results were great, they want to buy it. The results were bad, they were selling it.
06 – Get rid of the confirmation bias
– It is normal, when we have a very strong belief, that we look for opinions that agree with what we are thinking. It is more satisfying to validate our opinions than to confront them.
– The point is, if you only look for what confirms what you think, you will fall into the confirmation bias, and what really matters and makes you validate your opinion is when you hear what a someone who disagree has to say. And it works as a springboard/trampoline to turn your opinion into a better one.