How to Become A World Class Investor

Most people who think of themselves as investors don't really understand the important differences between stock selection, asset allocation, and position sizing. And this is unfortunate because there are statistics to prove that over time, as much as 90% of the money you make in the market will be generated by HOW you buy stocks, and not by which stocks you buy!

One of the most important differences between "World-Class" investors and everyone else is that world-class investors do three things that you probably don't:

1. They sell stocks.

2. They manage their asset allocation carefully against a benchmark.

3. They have a position-sizing discipline which they never break.

Most average investors won't sell stocks. They simply won't cut their losses, no matter how many times they tell themselves that in the future they will. Maybe it's because they don't like to admit they've been wrong about a stock.

World-class investors manage their asset allocation very carefully. Asset allocation is how much money you place into different asset classes like stocks, bonds, cash and/or real estate. Believe it or not, these choices are the most important parts of your investing.

Finally, the last difference between world-class investors and everyone else is that most people regularly break their own position sizing rules. They will get excited about one or two stocks and then invest too heavily in those few stocks. This almost always results in large losses.

You can improve your investment results and also sleep better at night if you institute a little discipline into your investing activities. Make sure that you use a trailing stop with any stock you buy and follow the position at least weekly. Also, adjust your asset allocation for market conditions, but don't get either 100% invested in stocks or 100% out of stocks. And lastly, don't go overboard for any one stock - not ever. The best advice is to never place more than 5% of your total portfolio value into any one stock.

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