Welcome To The Long Wealth Newsletter (July 11th). (est. 4 min read)

In today’s newsletter we will go over:

• Risk Management

• Overcoming Emotional Biases

• And much, much, more..

Actionable Tip Of The Day

Learn how to manage your risk in the stock market.

Warren Buffet said it best.. The number #1 rule is. “do not lost money”. The second rule is to listen to number #1.

In order to manage your risk, you need too:

1. Have a margin of safety

It's paying less for something than you think it's worth. Think of it like buying a car for $8,000 that you believe is worth $10,000.

The $2,000 difference is your margin of safety.

If you're wrong about the car's value, you have some protection against losing money.

2. Stay in your circle of competence

Focus on companies you understand well. If you understand tech companies well, you focus there instead of jumping into unfamiliar industries.

3. Be fearful when others are greedy

Prices might be too high when everyone's rushing to buy. This helps investors avoid buying at market peaks and potentially losing money when prices come back down.

4. Invest in quality businesses

• Make sure they have a MOAT

• They have consistent profits and steady growth

• Good management

• Long-term business

5. Dollar Cost Average

This basically means spreading out your purchases, potentially reducing the impact of market volatility on your overall investment.

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Deep Dive

Investing in the stock market is primarily a emotional game.

The sooner you’re able to control your emotions, the more money you’ll be able to make in the stock market.

That means overcoming your emotional bias.

This means recognizing and controlling the instinctive reactions that can lead to poor financial decisions.

You have to understand when fear, greed, or excitement are influencing your choices.

And only make decisions based on facts and analysis rather than hunches or emotions.

Here are ways you can overcome your emotional bias that have helped me:

• Don't make rash decisions because you're anxious for quick results.

• Don't abandon your strategy because of short-term market movements.

• Don't buy or sell just because everyone else is doing it.

If you can do those three very well, you will be able to overcome your emotional bias.

Let me know how it goes.

Happy investing.

Talk soon

Darold

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