10 Golden Rules for Success in Stock Investment - Practical Experience

Are you new to the world of stock trading and want to learn what you need to know to optimize profits? Investment experience comes not only from books but also from continuously updating market information and learning from experienced investors. Here are 10 basic principles that every investor needs to understand to avoid unnecessary mistakes.

1. Choose the Right Investment Method from the Start

Before starting, you need to clearly identify whether you are a short-term or long-term investor:

Short-term investment - Use day trading techniques, relying on chart analysis to determine buy and sell points.

Long-term investment - Focus on fundamental analysis, selecting good stocks and holding for the long term.

Each method has different knowledge requirements, risk levels, and trading frequency. Once you have determined your direction, stick to the discipline of your chosen strategy, avoiding impulsive buy/sell decisions driven by psychology.

2. Create a Diversified Portfolio to Minimize Risks

This is a valuable lesson from successful investors like Warren Buffett. Diversification means not putting all your money into a single stock or industry. You can buy stocks from various sectors or even invest in different asset classes such as securities, cryptocurrencies, or forex.

Benefits: When one sector faces difficulties, others can still grow, helping to offset losses. Broad market indices (such as S&P 500 or VN30) are examples of effective diversification.

3. How to Select High-Quality Stocks

If you are a long-term investor, choosing good stocks determines your success or failure. Here are key characteristics to note:

• Healthy financials: Low debt, liquidity ratio above 1.5 is safe
• Stable growth: Revenue and profit increase consistently over the past 5 years
• Profitability: Profit margins, ROE, ROA increase annually
• Dividend policy: Regular dividend payments to shareholders
• Reputable management: Leadership not self-serving, no deceptive actions or careless information

Over the past 10 years, Vietnamese companies like Vicostone, Vinamilk, Hòa Phát have experienced strong growth and are well-established with recognized leadership. Good stocks may not generate hot profits during bullish markets, but they are ideal “lifelines” when the market crashes.

4. Adjust Your Portfolio According to Market Trends

Even long-term investors need to periodically review and rebalance their portfolios. Social demands change, economic policies change, so your investment portfolio must adapt flexibly.

Example: When interest rates rise, sectors requiring large capital (such as real estate) will face pressure. At that time, you should reduce the proportion of these stocks and shift to other sectors with better prospects.

Warren Buffett is famous for holding long-term, but his Berkshire fund frequently adjusts portfolio weights in each reporting period. This shows that investment experience is a combination of patience and flexibility.

5. Risk Management Is the Foundation of Success

For short-term investors, controlling risk is crucial. Use stop-loss (Stop Loss) and take-profit (Take Profit) orders to protect capital:

• Sell stop order (Sell Stop): Automatically sell when the price drops to a preset level
• Buy stop order (Buy Stop): Automatically buy when the price rises to a certain level

A safe rule is to set the stop-loss point about 10-15% away from the opening price. This helps limit losses in worst-case scenarios while allowing trading to continue.

6. Determine Entry and Exit Points Using Technical Analysis

To optimize trading timing, experienced investors use technical indicators:

Relative Strength Index (RSI): Measures price volatility

• RSI < 30: Stock is oversold, potential buy signal
• RSI > 70: Stock is near peak, consider selling

Stochastic Oscillator (Stochastic): Identifies reversal signals

• Above 80: Overbought, increased chance of decline
• Below 20: Oversold, increased chance of rise

If you are not yet proficient with these tools, start with simpler trading models and gradually upgrade.

7. Skill of “Bottom Fishing” Stocks - Great Profit Opportunity

Bottom fishing (finding the lowest point before prices rebound) can generate extraordinary profits but is also very risky:

Signs of a true bottom:

• Price forms a new bottom but momentum indicators increase (showing selling pressure wanes)
• Price forms subsequent higher lows (selling pressure decreases)
• Trading volume spikes during the decline phase (investors are returning to catch the bottom)

Warning: Use only a small portion of your capital for this strategy. Never risk all assets, and avoid bottom fishing in speculative stocks or stocks below par value, as they may fall even further.

8. Do Not Borrow Money to Play Stocks

This is a common mistake many beginners make. Only invest with reserve funds—money that, even if lost, does not affect your long-term life.

If you want to amplify profits, use margin (margin trading) wisely. With margin, you can control maximum losses equal to your invested capital, while profits can be multiplied. Always set stop-loss orders to protect yourself.

9. Continuous Practice - The Key to Mastery

Warren Buffett once said that the secret to not losing money in investing is never to stop learning. You need to:

• Continuously analyze stocks
• Monitor market fluctuations
• Practice trading regularly
• Learn from each transaction

Beginners can try with demo accounts (demo account) to learn without risking real money. This helps build skills and confidence before starting with real capital.

10. Stable Psychology Is the Decisive Factor

The stock market is volatile. A position with big gains can turn into losses in just 1-2 days. Maintaining mental stability is essential:

• Do not panic sell: Analyze the reasons for volatility before deciding
• Do not be greedy during hot markets: Emotional decisions often lead to regret
• Follow your plan: If you have a strategy, stick to it

Successful investing requires a combination of solid knowledge, strict discipline, and stable psychology. The journey is not quick, but patient investors will reap worthy rewards.