We’re well into the summer months and you’re probably planning a trip. It takes time to plan, choose the route, and determine what you’re going to do when you arrive.

Have you taken at least the same amount of time and planned for your investing success?

Most of what we write on these pages deals with a particular strategy or a specific explanation of the TradeStops tools and how best to utilize them.

Today, let’s look at the big picture.

Successful investors have a plan for their success. It’s not luck and it’s not random. They set goals, monitor their progress, and make changes as their situations change.

Let’s review TradeSmith’s Roadmap to Investing Success, which can help you manage your investments in all market conditions. Here’s the roadmap again:

  • Start with great investment ideas
  • Embrace uncertainty and risk
  • Limit your downside
  • Un-limit your upside
  • Invest enough so you can sleep at night
  • Buy what’s already going up
  • Concentrate your portfolio
  • Pay attention to your overall portfolio risk

The beauty of this roadmap is that it can be customized for your goals. Whether your focus is income, growth, or both, you can take these steps and make it work for you.

Let’s look at a couple of these steps more closely.

  • Start with great investment ideas

How do you go about finding great investment ideas? We like to start with our partners in the newsletter world. They consistently have a number of good suggestions that, when applying the TradeStops tools to these picks, can be profitable.

The TradeStops Billionaire’s Club is also an excellent source of great investment ideas. Just recently, we showed you the success rate of more than one billionaire owning the same stock.

Our next step seems simple.

  • Limit your downside

This is the TradeStops mantra. Everything we do — Volatility Quotient (VQ), Stock State Indicators (SSI), PVQ — is to help you limit your losses.

The novice investor actually has a problem with limiting downside losses. They think they should never take a loss and end up holding on to their losing positions far too long.

Graph displays how we have more emotional involvement with our losing investments than our winners

Here’s the next step on our roadmap.
  • Un-limit your upside

The same tools that help you limit your downside can also help you un-limit your upside. We’ve shown you many examples of stocks that have had multi-year runs higher. The successful investor doesn’t sell their positions while they are still moving up. They continue to let them run as long as the stock is doing well.

And here’s the last rule we’ll focus on today.
  • Invest enough so you can sleep at night

We’ve written before that if you invest 1% – 2% per position and use the TradeStops Risk Rebalancer, you’ll be putting more money in your less-risky positions and less money in your more volatile positions. This way, a loss in a high-risk gold miner or biotech stock can’t wreck your overall portfolio.


Tom Meyer
Education and Research Specialist, TradeStops