While no professional investor wants to admit to investing in anything other than the stocks he/she recommends to clients, there is one main difference between investing personally and professionally: Patience. Although many investors claim they are buying for the long-term, if the stock doesn’t move up within a few months, they want to know what’s wrong and how long before it makes its move. The goal here is to not be disappointed when a stock takes several years to show major strength. You should determine areas where there is substantial growth capability and invest only in the companies that have a good chance to benefit from those trends. You shouldn’t focus on cyclical stocks and especially, don’t focus on buying a stock at the bottom of a cycle. If you buy stocks during down periods, you are a speculator, not an investor; because you are speculating that you know the bottom of the business cycle for the company. Avoid companies that can’t grow. For example, General Motors (GM) was a good buy in the 1970s * 1980s when it sold only two million cars a year, and there was still a large market to penetrate. As it stood less than a decade ago, there was no growth ahead and it had to file for bankruptcy. Don’t try to spread risk. Once you have chosen your areas and stocks, don’t bother trying to spread the risk with other stocks. Diversification seems popular in today’s day and age but it doesn’t make sense, because it just dilutes the effort. Remember, you’re not investing in the stock market to not lose, you’re investing to win.
How Professional Investors Handle Their Own Money