1. Entrepreneurs and partners work day in, day out to manage their business, as a shareholder you don’t have any responsibility for managing the company and can sell your shares whenever you want.
2. Two options for how to raise the massive amounts of capital needed to run its daily operations and make investments:

• Borrow money from a bank.
• Going public. Splitting ownership of the company into shares and selling them on the stock exchange. Shareholders own stock as long as they want until they sell it to other investors, hopefully turning a profit and sometimes collecting dividends in the process.

3.Sound investing is about rationality, not emotions. Say you own stock in Starbucks and read in the paper that the company’s valuation fell by 10% in just one day. Your emotions may urge you to sell your shares to avoid getting caught on a sinking ship, but don’t listen to them. If you approach the situation rationally instead, you’ll see that a 10% loss is an opportunity to buy more shares at a lower price. After all, you know the company has serious potential.

But rationality isn’t all you need. Investing also requires great timing. It’s essential to know when to disagree with the masses and buy when everyone is selling or sell when everyone is buying.

Good timing usually presents itself when extreme emotions are driving financial markets. For instance, during the 2000 dot-com bubble, investors were slobbering over internet companies like Pets.com and WebVan. However, it was quickly revealed that these companies had no business models, produced zero revenue and were bound for bankruptcy. Or take the 2008 global financial crisis when financial markets fell apart due to mass panic. During this time, even sound and profitable companies saw their shares devalued. In both this event and the dot-com bubble, there were lucrative opportunities by thinking differently from the crowd: namely, by selling in 2000 when enthusiasm was at its highest or buying in 2008 when panic struck.

4. Successful investing is about discipline, patience and only using money you don’t need to spend. Being a good investor is all about cultivating patience and discipline, so take it slow. Rushing investment decisions is a sure way to fail. The truth is, it often takes months, even years, for an investment to turn a profit. For instance, in the past, Facebook ran into difficulties soon after going public, and the stock dropped substantially only to quadruple a few years later.

5. Letting go of the fear that you’re missing out on an investment opportunity. For example, if markets rose by 20% this year and you failed to invest, you might feel like you missed out. Such feelings are natural. But in reality, there are so many publicly traded stocks that financial markets are virtually infinite spheres of opportunities. In fact, financial experts often compare missing an opportunity on the stock market to missing a train: another one is sure to come!

6. Avoid making bad choices based on irrational fears and only invest money you know you won’t need for the next three to five years. Keep the rest safely planted in your savings account.

7. Knowing when to break from the crowd is essential to good investing, and the most effective way to outsmart other investors is to build up your knowledge every day. But before you do that, you’ll need to know where your investing competencies lie. Warren Buffett, often cites the concept of a circle of competence. The idea is that it pays to know what you’re good at and to stick to it. For example, you know a lot about pharmaceutical companies. Your knowledge gives you an investment advantage in this field. But you might also be drawn to stocks in industries you barely know anything about. It’s important to avoid these and invest only in what you know. Remember, over time your circle of competence can grow if you keep learning about new investment opportunities and other industries.

In fact, continued learning will give you a profound advantage in investing. It’s pretty simple: knowledge gives you an edge because most people these days don’t have it. 23% Americans didn’t read a single book in all of 2014.

Knowing a bit about accounting may help you read a company’s financial report, but you need to be knowledgeable about the world around you to know what those numbers mean in the current economic and political landscape. So reading regularly is imperative to succeeding as an investor.

8. Remember that part of the investing process is learning from your mistakes. If you sell a stock too late and lose money the best thing you can do is analyse the situation! By doing so, you can determine exactly where you went wrong and be less likely to do it again.

9. Sound investing is about rationality, not emotions.

10. Sound investment decisions depend on simplicity and selectivity. There is a nearly infinite number of criteria to consider when assessing a company: brand image, financial performance, the management team’s charisma etc. To stay focused, stick to the Pareto Principle, also known as the 80/20 rule. Here’s how it works:

In the 19th century, the Italian economist Vilfredo Pareto observed that 80% of Italy’s land was owned by just 20% of the population. Based on this observation, he deduced that in many cases, 80% of the effects result from just 20% of the causes. And the same logic can be applied to investing: stick with the indicators that matter most to you and forget about the rest of them. After all, only a few will ultimately cause a stock to appreciate.

Selectivity is another way of being focused. So you shouldn’t buy a little bit of everything but choose stocks that fit your profile. In short, you need to apply filters. When Warren Buffet considers an investment he uses the following four:

• Do you understand the business? You shouldn’t invest in a company selling a new technology you don’t know anything about just because it seems innovative.
• Does the company have long-term potential? After all, some industries are fads and others, like food or health care, are more essential.
• Do you trust the management?
• Is the price right? If you think the stock is overpriced, move on and look for another opportunity.

11. When looking at a stock, it’s best to act like a five-year-old and never stop asking questions such as: Why do people like or need the company in their lives? Why do they consume its products? Is the company selling a revolutionary innovation or is it a trendy start-up that’s going to fade away?

You should also ask: Why is now the right time to buy? Major corporations like Nike, Exxon and Microsoft have existed for decades, so why should you invest in them today? Well, maybe they just tapped into a new and promising market or have nailed down a profitable long-term trend.

Another strategy is to seek out companies with a genuine competitive advantage, that is, one or more attributes that help them outperform competitors. One such attribute is pricing power, a company’s ability to easily raise prices while retaining its customers. E.g. Apple, when the company launches a new iPhone, they barely even consider the prices of their competitors. They know that consumers desire Apple products and will pay a hefty price to get them.

Finally, steer clear of companies that can’t anticipate change. Indicators of this are: cheap competition and the rise and fall of technology. Take Kodak, which fell out of fashion with the rise of digital photography, causing the demand for film cameras to plummet. (They also using cheap pricing as their strategy which is not sustainable in the long term.) Then, companies can better adapt to changing trends. For example, Coca-Cola is no longer just a soft drink company but has expanded its product line to other types.

12. Financial markets are prone to drastic drops and spikes. These changes can be caused by mood swings prompted by the overexcitement and exaggerated disappointment of investors. That’s because, today, investors are taking in too much information, gossip and rumors from the media. They overreact to this information overload by buying and selling too quickly. Therefore, investors today hold onto their stocks for exceedingly short period of time. For instance, in the 1960s, people held stocks for an average of eight years. Today, people will generally sell them after just 6 months. This rapid buying and selling also fuels the drastic fluctuations of financial markets.

Therefore, you shouldn’t pay attention to daily fluctuations in stock prices. Instead checking prices on a monthly or even yearly basis, you should give the companies you’re invested in the time they need to implement business strategies and grow in the long term.

Once you’ve immunised yourself to the market’s mood swings, you can begin profiting from those who haven’t. Smart investors can jump on the opportunity presented by the panic of others who want to sell at all costs. That’s because such moments are the best time to buy stocks at bargain prices.

13. Good investors make it their priority not to loose money. The best way to do this is to buy cheap. Buy those cheaper than their real value, those they may have imperfections, however with massive potential.

14. A wise investor would only buy shares of the company if it’s plan based on modest, long-lasting success.

15. Diversification is needed. For example, if you invest solely in banks, your entire portfolio will crumble in the event of a banking crisis.

To conclude, investing is about patience, discipline and rationality. By planning strategically and sticking with your investments, you can build up the portfolio and the wealth you’ve always dreamed of.

16. Accept your mistakes. The great thing about investing is that you don’t have to be always right. Even if you are wrong with a few investments, you can still turn a profit with the rest of your portfolio. Use these failures as inspiration to learn and do better the next time.