The absolute best tip for individual investors is to understand investments, finance, and everything related to making money possible. Successful investors do not gamble with money when it is unlikely that they will win. More accurately, successful individual investors do not gamble at all, but invest thoughtfully with a strategy for dealing with adverse outcomes. The key to being an individual investor is to have a plan and to understand the market. Everything after that is merely luck.
There are certain advantages unique to individual investors. For instance, an individual investor can move stock much more quickly than an institution and can also chase opportunities more aggressively. One of the most important advantages individual investors have over institutions is the capacity for movement. On the other hand, there are also a number of disadvantages, such as fewer resources and the responsibility for the loss of one's own money.
One of the best tips for individual investors, then, is to invest in businesses rather than numbers. Stocks are parts of businesses, and while they result in money for investors, they do not turn into money by magic. A company with a good product and a solid business plan is a good investment. One should aim to predict the success of a business rather than the whim of a market.
A very important tip for individual investors is to resist the urge to get greedy or gamble. Large amounts of money can be lost with risky investments. Diversity is important, but control is also essential.
The best way to avoid absolute catastrophe is to buffer one's investments by balancing where one invests. For instance, having money in domestic markets, foreign markets, and real estate can help protect against dramatic decline. Many people believe that there is no way for an individual investor to beat professionals who can devote their lives to making money, but some people achieve a reasonable amount of success using simple strategies and safe investments.
Another important tip is to always have an exit plan. Things often go wrong in investments, and it is important not to get emotionally attached to a failed endeavor. Following a plan can help avoid major catastrophe when investing.
It is important for individual investors to utilize only reputable advice. There is an absolute wealth of information out in the world offering get-rich-quick schemes. Having the ability to think critically about advice is essential to an investor's success. Every source of information should be thoroughly evaluated. Again, understanding the market and achieving a level of expertise appropriate to an investor is absolutely essential for success.