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Stansberry Research’s 11 Steps to Maintaining and Building Wealth with Your Investments

Starting out as an investor is intimidating. Spend a few minutes in the investment section of a bookstore, or watch a financial television program, and you’ll encounter at least half a dozen market strategies. It’s information overload.
If you’re new to investing, or if you haven’t found investment success yet, Stansberry Research’s 11 Steps to Maintaining and Growing Wealth with Your Investments is for you. We’ve identified 11 core concepts that we believe are vital to successful investing. Below each concept are links to educational essays, interviews, or books that will help you learn the concept.
These are the ideas we wish we’d learned before we invested a single dollar. Take these 11 concepts to heart, and you can ignore everything else.
Becoming a successful investor is a long journey. Take your first steps below…
Step 1: Realize that the surest road to wealth is not through your investments
You’re very unlikely to achieve tremendous wealth through investing alone. The best way to achieve wealth is by building a successful business or by becoming a highly paid employee… then saving a large portion of your earnings rather than spending them.
Once you’ve mastered the “earn… then save instead of spend” mentality, then move on to investing. It can maintain and grow your wealth.
Read our material on this idea right here:
How to Get a Raise at Work
By Mark Ford, founder, The Palm Beach Letter
By Porter Stansberry, Stansberry Research founder and Aaron Brabham, Stansberry Radio
Step 2: Learn the language of investing… learn the basics.
Just like any subject or activity, investment has its own glossary and basic principles. In order to invest successfully, you need to know what stock is… what a bond is… what a dividend is… and so on. If you don’t learn the fundamentals, you’ll lose the game before it even starts.
Fortunately, learning the basics of investing is easy. The Wall Street Journal has a short, easy-to-read primer called The Wall Street Journal Guide to Understanding Money and Investing. You can buy it used on Amazon for less than ten bucks. You can also learn the basics from one of the “Dummies” or “Complete Idiot’s” guides.
Step 3: Learn why asset allocation is the number one factor in your investment success.
Knowing about intelligent asset allocation (how you much money you place into asset classes like stocks, bonds, cash, real estate, etc.) is 100 times more important than any stock pick. It’s 100 times more important than knowing the next hot country to invest in… what option to buy… what the housing market is doing… or whether the economy is booming or busting.
Not taking this idea into account has ruined more retirements than any other financial factor. If you don’t know and practice proper asset allocation, you’re almost sure to lose money with your investments.
Read what Dr. David “Doc” Eifrig has to say about asset allocation – and how to properly value your assets – in this Stansberry Research classic:
Asset Allocation
An interview with Dr. David Eifrig, editor, Retirement Millionaire
Step 4: Learn how to limit your investment risk through intelligent position sizing and stop losses.
If you don’t know how to calculate your “position size” (how much money to put into the trade), or your “stop loss” (the point at which you need to sell), you’re almost sure to lose money with your investments.
The key concepts of asset allocation, position sizing, and stop losses allow you to follow the No. 1 rule of investing: Don’t lose money!
Learn more about managing risk in these essential Stansberry Research guides:
An interview with former Stansberry Research Editor in Chief Brian Hunt
By Brian Hunt
Step 5: Discover the magic of compound interest.
Compound interest is the most powerful investment force on the planet. It can either work against you, or for you. Once you get it working for you, you’re mathematically guaranteed to grow wealthy.
Learn the basics of compound interest – and how to maximize its power – in the following essays:
By Dr. David Eifrig
By Dr. David Eifrig
By Dan Ferris, editor, Extreme Value
By Tom Dyson, publisher, The Palm Beach Letter
Step 6: Realize that when it comes to buying stocks, you are buying partial ownership of real businesses.
When you realize this, you’ll always look to buy high quality businesses that treat their shareholders well.
Read these Stansberry Research essays on the attributes of high quality businesses that smart long-term investors always look to buy:
An interview with Dan Ferris
An interview with Dan Ferris
An interview with Porter Stansberry
By Porter Stansberry
How to Buy the Most Capital-Efficient Stocks, Safely
By Porter Stansberry
Step 7: Realize that very popular investments are almost always a bad deal… and very unpopular investments are often incredible bargains.
Asset classes like stocks, commodities, bonds, and real estate go through cycles. They go through periods of being very popular and being very unpopular.
When an asset is very popular, lots of people want to buy it. When lots of people want to buy something, they bid the price up, and it becomes a terrible bargain.
When an asset is very unpopular, the price declines, and it can become a great bargain.
Just like at the supermarket, you want to buy great values… not terrible bargains.
Read more about this idea here:
An interview with Dr. Steve Sjuggerud, editor, True Wealth
Step 8: Realize that it’s perfectly okay to DO NOTHING from time to time.
Many people make terrible mistakes with their investments because they’re always looking for “action.” They get impatient and buy an investment not because it’s a great bargain, but because they want “action.”
If you don’t see any great values in the market, don’t buy anything. It’s perfectly okay to park your wealth in cash… and wait for great values to appear.
Learn more about the art of inaction right here:
By Porter Stansberry
An interview with Dr. David Eifrig
Step 9: Realize that Wall Street is NOT in the business of helping individual investors. It’s in the business of selling stocks and bonds to the public.
Wall Street bankers drive around in $200,000 cars, live in $10 million homes, and build hugely expensive corporate headquarters. The money required for all that comes from customers who are encouraged to buy every piece-of-crap security the bankers can come up with. It’s the same way that Las Vegas casino owners get rich.
Wall Street is in the business of raising money for its corporate clients. It does this by structuring stocks and bond deals… and then collecting huge banking fees when investors buy them. Some of these deals are good for individual investors… but MANY are not.Think about the brokers, lawyers, accountants, and other people you do business with. Always ask what they get out of it. Ask what has to happen for them to make money. When you buy stocks, ask who’s selling them, or who has sold you on the idea of buying them. Know the business you’re in, and know the businesses you deal with.
Learn what most brokers and financial advisors won’t tell you in these Stansberry Research classics:
By Porter Stansberry
By Brian Hunt
Step 10: Resolve to avoid complex investments that you don’t understand. If you can’t describe on an index card why the investment makes sense, don’t buy it.
Great investments aren’t complicated. They are often very simple. Wall Street doesn’t want you to know this, because it wants you to be dependent on its “genius.”
Before you buy a single stock, go buy a pack of index cards. If you can’t describe on an index card why you are buying an investment, pass on it. Something simple and safe will come around soon.
If “Poor Henry” had understood this concept, he’d have avoided four common mistakes. Read his story here:
By Dan Ferris
Step 11: Once you master smart asset allocation, position sizing, stop losses, and identifying great businesses for long-term investment, consider learning the principles of successful short-term speculation.
Most folks will do fine without making a single short-term trade (less than one year in length) their entire life. In fact, most people simply aren’t emotionally suited to trade short-term market movements. Those people should stick to owning high quality stocks, bonds, and real estate for the long-term.
But if you educate yourself, you’ll learn that an intelligent wealth plan can include a handful of low-risk, high-reward speculations. Tremendous short-term opportunities appear from time to time.
Learn the basics of short-term trading in these timeless Stansberry Research interviews:
An interview with Brian Hunt
An interview with Brian Hunt
An interview with Brian Hunt
An interview with Jeff Clark, former editor, Stansberry Research Pro Trader
Beginners guide
Investment Glossary