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How Billionaires Make Millions in the Stock Market

| Swing Alpha on 7 Mar 2017 12:00 AM

You must have heard of people like Warren Buffet and Peter Lynch; they are billionaires from stock trading. They do not hide what they do to become billionaires after all the world could do with more billionaires don't you think so? Forbes needs new people to cover; you could be one of those people especially if you are seeking to trade stocks.

Billionaire investors made small milestones towards success with a plan. Billionaires made plans of investing and decided what they wanted to get out the stock trading. Remember, the more time you take to make a plan the more the likelihood of success. Such great investors took a lot of time in planning. When planning, one does a lot of research. This is the point that they evaluated their risk tolerance. They also decided how much returns they needed though the focus should not be on returns but rather the investments. Such billionaires also decided how much they needed from each investment; of course, you don't want to have a mechanic repair your car without agreeing on the price first.

Billionaires also diversify their portfolios; diversification reduces risk to a great.  There are all sorts of stocks such as growth stocks, small cap stocks and large cap stocks. Stocks earn a higher annual return than bonds. This means that stock prices can fall or rise easily while bonds are different in that they are less volatile.  We are talking of bonds like junk bonds and government bonds which can be short-term or long-term.As an investor, you can decide to invest in stocks only to earn more. A billionaire investor knows that they should diversify their portfolio to fifty percent stocks and fifty percent bonds; this significantly reduces the risk of loss in the case where stock prices fall. Depending on the time horizon one chooses, a billionaire knows how to diversify their portfolio. Diversification ensures that an investor gains the maximum return with the least amount of risk. I cannot get over-emphasis on the need for diversification, as you can see it is among the most important things in stock trading, and of course, you cannot diversify away from the entire risk, the trick is to diversify as much risk as possible.

Just as Warren Buffet stated, "stay invested, do not chase returns' this is because the more you chase returns, the more you incur commission fee. Back in 2008, a lot of investors fled the stock market due to its collapse. But what did billionaire stock investors do? They stayed invested, and when the market rose, they got their money back and more. Billionaire stock investors do not take decisions based on greed and fear because they know that their goal is long-term. Well, the stock market will collapse at times but how long does it stay in that state?

Billionaire investors track their progress from time to time. It is keeping an eye on the prize, t see whether or not they are meeting their long-term goal. Such an investor will tell whether he is taking more risk or getting lower returns that might make him not meet his aim. Therefore a billionaire investor will rebalance to get the most of the investment. This may sound overwhelming but trust me, to be rich you need tactic; it is what makes the difference between the wealthy and the ordinary people.

Billionaire investors think for themselves. Someone might have told you to check finance sites for recommendations on investment it could be true, but it is not the gospel truth. Listen, read and make your judgments. Great billionaire investors know that the Wall Street Journal is there to make you buy stocks that some of those people would not buy themselves. Carl Icahn, one of them does not need finance sites to know what to buy because most of the time he has already done his research. Warren Buffet bought the Washington Post shares in 1973 when the Wall Street Journal acknowledged that it was too risky, yet he ended up successful.  They look for companies with good balance sheets, cheap valuations, and good management trading cheaply in adverse market conditions. The most important thing is to do research and deduce information.

Great billionaire investors know better when to embrace a new business model or a new model. While most people flinch on new markets, a billionaire investor knows that new is the future and invests in such before the share prices rise.

Don't be a "buy low, sell high," investor all the time. Sometime look further than just short-term returns. This "buy-high, sell low" narrative causes an average investor earn little returns is A billionaire investor know that to make maximum returns over the long term, you do not have to follow the herd.  They take the paths rarely trodden on. Buffett's excellent advice to an upcoming investor is "be greedy when others are fearful and fearful when others are greedy." Warren Buffett and Carl Icahn have made billions of dollars buying stocks when everyone else is selling. Back in 2011, Buffett invested $5 billion in Bank of America; now the value is almost triple remember it is then that the stock market was collapsing during the summer. Had he not taken the risk and followed the crowd he would be three times richer on this investment. In 2012, a similar scenario happened; Icahn bought a ten percent stake in Netflix when the stock was trading at very low price sell. The trick is to find the hidden value of the stock when everyone else is not seeing sense in them.

Now, do you want to be millionaire investor in stock trading? Pick all these advice they worked for billionaire investors, why not you? It seems that you just have to employ a little tactic, looking beyond what the average investor sees. You will not become a billionaire overnight, but most likely you will become a billionaire investor faster than you thought. Remember, you do not have to study Economics to know how to trade. Rather, you just need to research the ocean of stock trading and pick out a few things.

3 Mar 2017 4:38 PM | Anonymous

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