In this article you will discover some of the key secrets to successful investments. They are not secrets because few people now about them but because few people practice them in the market. So let’s get started…

Secret #1: Invest when the economy is bad.

If you want to have long-term success in the stock market you must take a contrarian approach and go against the market. Many great fortunes have been made by people who started out in a bad economy. The stock market is manic-depressive and several strong companies have seen their stock prices been beaten down by the bear market.

When Wall Street is on sale you should take advantage of it. This is absolutely critical! In fact I cannot stress this enough but let’s continue with secret #2…

Secret #2: Learn to identify undervalued stocks.

You must learn to identify undervalued stocks. This is not as difficult as you might think it is. It is necessary to know the right methods. You can look for stocks with low P/E ratios or low price to cash flow. Or you can focus on low price to dividend. Stocks with low price to dividend will give you the best protection during a market downturn.

Of course you can also use the net net method and get the company’s liquidation value. It will take some time and effort to invest this way. But the payoff can also be great. This is the core of value investing advocated by legendary investor Benjamin Graham. Obviously there are more companies around that trade beyond its book value in a bear market.

When you have selected a company that looks like it could be a good investment it’s time to take a closer look at the finances. You want to pay attention to the debt situation. A debt to equity of 50% is reasonable. Remember that companies with no debts won’t go bankrupt.

It doesn’t take a mathematical genius to learn the methods necessary for identifying undervalued stocks. I would say that the contrary is truth. The more complicated formulas you use the worse results you finally get. However in order to effectively use any investment strategy you’ve got to know secret #3.

Secret #3: You must get the market psychology on your side.

In order to succeed in the stock market you got to think and act independently. Doing what everyone else is doing will only give you average or below average results. You must turn off the market noise around you and trust your own decisions. The market noise comes from all the media but also from friends and family. When CNBC recommends a stock it might be time for you to sell it.

You must keep the focus on the companies you invest in and not on the economy in general. It takes courage to step out of the crowd and go against the market. This is probably where most investors fail. But remember that you are not wrong just because everyone else says that you are wrong.

The author, Hans Noren, is a Swedish investor and entrepreneur. His book How to Invest Like The World’s Greatest Investors is now available in ebook format. Get it from Amazon today http://www.amazon.com/INVEST-WORLDS-GREATEST-INVESTORS-ebook/dp/B0076B1U7S/ref=sr_1_1?ie=UTF8&qid=1331604107&sr=8-1

The author, Hans Noren, is a Swedish investor and entrepreneur. His book How to Invest Like The World’s Greatest Investors is now available in ebook format. Get it from Amazon today http://www.amazon.com/INVEST-WORLDS-GREATEST-INVESTORS-ebook/dp/B0076B1U7S/ref=sr_1_1?ie=UTF8&qid=1331604107&sr=8-1

Author Bio: The author, Hans Noren, is a Swedish investor and entrepreneur. His book How to Invest Like The World’s Greatest Investors is now available in ebook format. Get it from Amazon today http://www.amazon.com/INVEST-WORLDS-GREATEST-INVESTORS-ebook/dp/B0076B1U7S/ref=sr_1_1?ie=UTF8&qid=1331604107&sr=8-1

Category: Finances
Keywords: investing rich money stocks wall street wealthy