1. Always have cash handy on your portfolio, at least 10% of it. When there is a bear situation where the stocks are down, you can buy the stock at cheap price if and only if you have the money.
2. Pros are usually focus on the downside instead of the upside. Which means they look at the risk of their portfolio first, instead of thinking of the profit. Pros know this inevitability, so they buy companies with huge stock-repurchasing plans and healthy dividends, which protect their investments when that decline comes.
3. If you don’t know it, don’t buy it. Pros pass up investing in companies they don’t understand all the time because they’d rather hold on to their money.
4. There is such a thing as making too much money – might be a bit harder for amateurs to understand. But the bottom line is that making to much money is usually a sign that a portfolio is overexposed to one stock or sector. Think dot-com era, 1999-2000. Everyone was in tech. Everyone was making money hand-over-fist. Then everything collapsed. It never costs any money to take profits, so do it before it’s too late.
5. Earnings season produces the smallest profits and biggest losses of the year. Why? Because too many people – analysts and institutional investors – are making snap decisions based on the numbers. Investing during earnings season is too much of a gamble. And when you gamble, the house always wins.