Becoming a Successful Investor
Whatever strategy you employ to manage your portfolio—to select stocks, hold them, trade, and make your goals into realities—the ultimate test will be profits. If you meet your goals, then you will succeed as an investor. If you do not, then your strategy and actions will prove to have been wrong.
The key question concerning the decision about which approach to take should be: Have you ever met someone who adhered to fundamental principles and lost over the long term? The point is, when you hear about people who lost in the market, it is worth examining what they did and how they lost. While fundamentalists can lose just like anyone else taking a risk, most of the unexpected short-term losses you hear about result from speculative activity. This includes investing without research and only on a rumor, taking someone else's advice without discovering the source, abandoning a sensible policy to follow the herd, selling in a panic, investing on indicators that have no real meaning, employing strategies without really understanding them, or ignoring fundamentals that (at least in hindsight) are glaringly obvious.
rKEY POINT
The majority of losses in the market result from easily identified mistakes and those can be avoided.

All of these mistakes are likely to expose you to short-term market risk. The truly studious, serious investor does not make those mistakes. If you are intent on succeeding in the stock market, and if you would prefer to select your own stocks rather than trusting a mutual fund's management, then you will need to use the fundamentals. Furthermore, if you follow a sensible course and set rules for yourself—not only about buying, but also about when and why to hold or to sell a stock— then you have a much better than average chance of profiting from your investments.
Setting policies enables you to maximize profits and minimize losses. You may be certain about one thing. Both profits and losses are going to occur in the market, and you will probably experience both. There are steps you can take, however, to ensure that your hard work, research, and sincere belief in the fundamentals will ultimately pay off.
Three suggested simple but logical investment and risk management policies that probably will enhance your overall profits are:
1.    Identify the reasons you will sell. Fundamentalists are supposed to identify the best possible growth prospects, and then diversify their portfolios and invest in those stocks for the long term. This is a simple strategy. However, remember that things change. Watch the trends you choose, and be willing to sell a stock if today's financial strength turns into financial weakness. Some industry leaders will be replaced in the future; some growing companies will plateau and cease growing; many companies that are strong today will be obsolete in the future as new competitors and new technology change the way that people buy. Be aware that even the fundamentals have to be monitored so that important financial changes can be recognized as early as possible.
2.     Set analytical criteria and review regularly. The trends you choose to watch are all-important, but of equal importance is the method you select in your review. If your analysis is not producing reliable information, then it is time to replace one set of trends with another, more informative one. Because a company's financial status changes over time, some trends cease to reveal what is really going on. You need to be aware of this, and to recognize when the information in a trend is not really revealing anything of interest. Constantly look at all of the ratios to spot which ones have more interesting trends and may be properly included in your analytical program.

3. Keep an open mind to the possibility of change. It is certain to occur. Finally, be aware that even the strongest, most solidly managed company of today might be entirely obsolete tomorrow. History can teach us a lot. The time when railroads and steel companies dominated the market has long passed. Likewise, the makeup of the DJIA has changed since its inception. The changes reflect a changing society and economy; new technology; and a move away from manufacturing to service. In the future, it is virtually certain that today's technology and consumer interests will be replaced with something new that has not yet been invented.
Trends are visible everywhere. Consider the impact of the Internet. Serious investors should have access to the Internet, if only for the convenience of quotation checking. Many investors trade on the Internet, or at the very least use it for research into companies. In the future, it is likely that modern television, telephone, and communications technology will be replaced by something more instant, more affordable, and more efficient—and that these new technologies will be available through the Internet.
If you apply this type of social development to your understanding of the market, you will better comprehend the nature of investing successfully. There is no one set formula or strategy that will work forever. Change defines and characterizes the market. You need to be able to change, to consider new and even radical ideas and strategies to keep ahead of the majority, and to better develop fundamental approaches to portfolio management.
In the long run, the successful investor is one who is willing to put in the time for research and comparison; who takes the time to become proficient at interpreting financial information; and who is willing to compile trends and watch them from month to month. This requires commitment and work. It translates to profits in the future, which occur over time and not all at once. The allure of getting rich suddenly and without any work will always appeal to some people, and a few make it. Most, however, end up losing money as a reflection of inexperience and wishful thinking.
You will succeed in the market as long as you use fundamental analysis—not only as your primary means for picking stocks, but also for the subsequent decisions about when or if to sell. The allure of immediate profit, of finding an easy way, and of winning the prediction game, are widely popular and fun, but the fundamentals—dependable but requiring greater patience—have the advantage over the years: Fundamentals show you the path to consistent profit and to meet your goals.