This document presents 13 essential rules for profitable investing, emphasizing the importance of having a clear plan, managing costs, and maintaining discipline. It encourages investors to focus on long-term strategies rather than short-term market fluctuations and highlights the need for self-awareness and confidence in investment decisions. The guide concludes with a reminder that successful investing often involves minimizing costs and sticking to a systematic approach.

1. BITE-SIZED GUIDE
13 Essential Rules For
Profitable Investing

2. 13 Essential Rules For Profitable Investing
General Advice Warning: The ideas and information contained in this publication are for
general information only. They do not take into consideration your personal circumstances or
objectives. Please considering if these ideas are appropriate for your needs before taking any
action. We suggest you seek advice from a financial professional if necessary.
Disclaimer: We have prepared this publication to the best of our knowledge and consider
it accurate. Please do you own research or inquiries before acting on any of the ideas or
information contained.
Performance: Past performance is not a reliable indicator of future results. Any published
performance figures are hypothetical as they are based on prices at the time the idea was
released, and may not accurately depict slippage or transaction costs.
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3. 13 Essential Rules For Profitable Investing
Contained within this guide are 13 essential rules
for profitable investing. Each rule is easy-toimplement and will bring about a measurable
increase in your long-term returns.
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4. 13 Essential Rules For Profitable Investing
Have a Plan and Follow It!
It goes without saying that having and following an investment strategy designed to achieve
your investing goals is very important. But what makes a plan easy to follow?
A crucial ingredient is to have a positive expectancy. If you know that by following your plan in
the long run it will achieve your goals then you will have no trouble taking the next position,
even if the last one, two or more did not work out for you.
Another helpful ingredient is to know when your system will and will not work, under what
market conditions it will struggle and what conditions will it prosper. Once you are armed with
this knowledge you will have no trouble sticking to your rules!
P.S. Need an investing plan? Get our bite-sized guide on How To Create Your Very Own 5-Star
Investing Plan here.
Knowing the long-term returns your investment strategy will produce keeps you disciplined
even if you do suffer short-term losses.
Keep Your Eyes on the Horizon
Understanding your investment horizon is crucial. If you are 30 then you will probably have a
35-year career as an investor. If you are 50 you still have a significantly long time to go until you
retire. Most investors focus on the short-term market moves far too much.
Warren Buffett said, “All you need is one good idea a year and then ride it.”
If you have a 30-year or 15-year timeline, and you have a strategy that produces on average
one good idea a year that you can ride, then you will have a very successful investing career.
You have a long investment career in front of you – you only need a few good ideas to be
very profitable over the long-term. (And on another note, you can be happy that you don’t
actually need to spend much time following the markets and can do the things you enjoy
instead!)
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5. 13 Essential Rules For Profitable Investing
Stay Away from the Noise
Avoiding information overload helps reduce the temptation to invest outside of your plan.
For example, a leading financial expert on TV suggests that you could get 7–8% return (via
dividends) from bank stocks when you can achieve only 3% in the bank on your savings. The
same expert then tells you three reasons that bank stocks must go up in value, and that they
are a “lay up”. Would you be tempted to buy?
In fact, buying bank stocks could be precisely the wrong thing for most people to do in this
instance. Not because there is anything wrong with bank stocks, but because the advice falls
outside the larger context of a proper investment strategy.
Do your best not to be influenced by what your friends or the experts on TV say. Instead focus
on understanding the processes of investing itself. Get to know what truly works in the markets
and the principles of investment success. You are much better off reading the wisdom of
history’s famous investors than watching the business channel.
For a long-term investor, stay in touch with the markets by checking in once a month to read or
listen to three or four trusted commentators. (Our website has a list of experts that we follow.)
(By the way, we think many experts on TV are great. What we have an issue with is the constant
temptation and noise that causes investors to deviate from their long-term plans. After all, your
investment success is a product of the quality of the system you use, less the mistakes you
make.)
Avoid the market noise and focus on understanding the processes and principles of
investing.
When You Get In…Know When To Get Out!
In the example above, we saw an expert on TV telling investors to buy bank stocks. It was a
real life example and at the time of writing I don’t know if he was right or not. I am sure there
have been plenty of good calls and bad calls made over the years. The problem with these
recommendations is they only cover one side of the equation. You now know what to buy but
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6. 13 Essential Rules For Profitable Investing
you don’t know when to sell. I would imagine that if 100 investors went out today and followed
this man’s recommendations then every one of them would end up with different results. Their
profit would depend on when they sold the investment – not when they bought it!
Know when you are going to take profit on all your investments.
Don’t Let Your Profits Disappear
IDeciding when to get out of a successful investment is one of the greatest challenges that
investors face. When we have a profitable position we tend to want to keep it in the hope that
it goes up more. When it goes down a bit we promise that if it only goes up to the previous
high we will surely get out. All of a sudden we find that our stock is back to our entry price and
our profits have disappeared – and even worse, sometimes the trade goes into a loss! Letting
winning trades turn into losers is not a recipe we want to follow.
Have an exit strategy in place when you enter into the investment.
Don’t Let One Position Get Out of Control
Too many investors neglect position sizing. The problem being that if you trade too large, one
adverse position can have an outsized negative impact on your portfolio. Luckily enough the
size of your position is one of the things you have absolute control over. Always keep in mind
the worst-case scenario and keep your trades small enough so that if it does happen you won’t
be too troubled. This will also help you sleep at night!
Keep the size of any one individual position within reasonable limits.
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7. 13 Essential Rules For Profitable Investing
Keep Your Costs Low
One of the best ways investors can improve their returns is to decrease their costs, as fees
can quickly chew through your profits. Even the common 1% annual fee charged routinely by
the financial community can reduce the size of your profits by 20% or more over a one-year
period. The fancy inner city offices and large salaries don’t come from nowhere! Warren Buffett
estimates that 30% of all investors’ profits are directed to the financial firms that manage their
money.
Courses or services that charge a large initial fee of several thousand dollars for education or
software are another place investors lose out. It may seem very enticing when you hear the
sales person’s pitch but do remember these costs come directly off the top of your returns.
In our experience you can get the same or better at a much lower cost elsewhere. As a rule of
thumb I would avoid paying more than a thousand dollars for an education course. Of course I
am sure there are exceptions to the rule so do use your judgement.
If you do have any money managers, courses or software you are investigating then please feel
free to send them through to us and we will give you feedback at crew@spoonfedinvestor.com.
Keeping your costs low is of utmost priority. Do everything you can to minimise your fees!
Avoid Over-Trading
Being active in the markets occurs additional costs. Here is another quote from Warren Buffett
that investors should take note of: “For investors as a whole, returns decrease as motion
increases.” For most market participants, trading too much too often means that you pay more
of your money in commissions to your broker, with little or no improvement in your results.
You spend time watching the markets when you could be focusing on your career or business
(or family or fun!). The more active you are, the more mistakes you tend to make – and you can
miss out on the natural upside drift of the markets.
This is great news for most people. You can actually relax and not have to follow the markets
each and every day to be a profitable long-term investor!
The less you trade the more profitable you could be.
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8. 13 Essential Rules For Profitable Investing
Time for a plug! At SpoonFed Investor we provide you with a simple investing plan that
minimises your fees and produces returns significantly above the markets over the long-term.
Just as importantly, we give you the education and psychological support you need to stay on
track – and that makes all the difference. Visit www.spoonfedinvestor.com now for a $1 trial –
it’s the best investment you will ever make!
Don’t Assume
When I talk to our customers I hear a lot of ‘folk wisdom’ when it comes to investing. As human
beings we all make assumptions about the way things work. This neurological shortcut is
ingrained in us and allows us to function in a society that is overwhelming with information.
When it comes to investing, making assumptions is very dangerous. The market is unforgiving
and your belief system does not matter at the end of the day. Rules of thumb are important
in the market, but don’t rely on them and don’t be so sure that they are true even if they are
useful!
Don’t assume that investing folklore is correct when you make decisions.
Know Yourself
Socrates, the ancient Greek philosopher, famously said, “Know thyself”. Self-knowledge is
incredibly important in the markets. When you are investing try to notice things about yourself,
such as:
} Do you tend to want to follow every twist and turn of the price chart?
} Do you feel a need to exit from investments as soon as they have some profit?
} Do you have trouble closing out of losing trades?
} Do you always feel like you need to have big wins?
} Do you keep interfering with your plan?
} Can you sleep properly, or do you worry about your investments?
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9. 13 Essential Rules For Profitable Investing
These tendencies are things that cause you to break your rules and lead to losses. To improve
this aspect of investing, you typically have two choices: you could either practise discipline
to overcome the tendency or you could design a system that takes your tendencies into
consideration. Perhaps you will want to do a bit of both.
Notice the emotions you find yourself experiencing when investing and design your
investment strategy around them.
Build Confidence
There are great long-term opportunities that come along consistently in the markets, but often
they come along at counterintuitive times. The best buying opportunities are when markets
are at extreme lows, but if you are not confident in your investment strategy you most likely
won’t be confident enough to buy. Fear of further losses and the doom and gloom in the
media keeps you paralysed on the sidelines at exactly the wrong time. Only confidence in your
investing plan will allow you to overcome these negative influences to make the courageous
decision to buy when everybody else is selling.
Take the time now to become comfortable with investing. Even if you are feeling afraid, take
little steps. Start off small and get used to what you are doing. You don’t want to be unprepared
for the very best opportunities that come along and have to sit out the next big market run up.
If you find yourself coming up with excuses to delay investing such as “the market’s too risky” or
“I want to wait until things are more certain”, then recognise that these are probably symptoms
of a lack of confidence. Instead of avoiding taking action you can slowly get yourself prepared
by learning your strategy and taking small positions.
If you want to get in on the very best opportunities you will need to be confident enough to
take them.
Expect Losses as a Part of Doing Business
Loss avoidance is a major problem for many investors. If you are unable to take small losses
every now and again, you will surely suffer a large loss that will have a devastating impact on
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10. 13 Essential Rules For Profitable Investing
your portfolio. If you can think of investing like a business, and losses as the inevitable cost
of conducting this business, then you will have taken a large step on the road to long-term
success.
Take small losses in order to avoid the big ones.
Free Your Mind
A quick note here for if you do suffer a large loss in the markets. Closing out of the losing
positions that you have been holding onto, while difficult, might be the right thing to do.
Once you accept the loss, not only does it free your capital but it frees your mind for future
possibilities. Investing is more psychological than anything and holding onto losing positions is
a burden you don’t need.
Importantly, don’t let the losses hold you back from implementing your new strategy. Along
with removing the old positions, let go of any fear of loss you may hold.
Closing out of the losing positions you have been holding onto for a long time not only frees
your capital but also frees your mind for positive investing in the future.
Afterword
In this guide you have learned 13 essential rules for profitable investing. As you have most
likely noticed, many of them revolve around having a simple plan that reduces your costs and
allows you to take advantage of the long-term upward drift of the markets. The good news
is you don’t need to be involved in the markets every day to be a successful investor. Instead
you can focus on yourself and your own goals, feeling confident and comfortable that you are
prepared for long-term success.
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11. 13 Essential Rules For Profitable Investing
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