This is the Most Important Rule of Investing to Build Your Wealth

The most important rule of investing is probably not what you think.

A friend of mine recently bought a $30 stock that suddenly fell to $20.  He invested quite a bit into this stock - so now he's having trouble sleeping.  He wants to 'ride it out' until his stock returns to $30, but in the meantime, he's sick over this!

When he told me about it, I realized that his main trading focus in on finding an undervalued company that's about to soar!  If he can find such a company, he'll make a killing!  His emphasis is on MAKING money.  But that's why most individual traders generally do poorly in the stock market.

Most successful investors would agree that the #1 most important rule of investing is:

"Don't Lose Money."

It's critically important to understand that in order to recoup a loss, a stock will need to achieve a higher percentage gain than it lost.  Huh?

Let's go over a simple example to clarify what I'm talking about.

Let's say I bought a stock for $30 a share and it lost 33% of its value by falling to $20.  BUT, when that $20 stock achieves a 33% gain, its price will be at only $26.60 - not $30 yet.  In order for that $20 stock to return to its previous price of $30, it will need to achieve a 50% gain!  A 33% loss requires a 50% gain to break even.

How often does ANY stock quickly increase in value by 50%?  Not often.

A 50% loss in value requires a 100% gain to break even.  Its value needs to DOUBLE!  You can grow old waiting for that to happen!

Therefore, the #1 rule of investing is not about making money, it's about cutting your losses short.  Big losses are very difficult to recoup.  We all know people who lost a huge chunk of their retirement accounts due to our crazy market.  If they were focused on the rule "Don't lose money", they'd still have their nest eggs intact.

Always implement a simple strategy called a "stop-loss."  A "stop-loss" is a trading feature that will sell your stock automatically and immediately if the stock value falls below a certain price.  It "stops your losses."  If you buy a $30 stock, you might set a "stop-loss" point of $27.50 so that if the stock suddenly falls in price, it will automatically sell your shares on the way down.  In our example of a $30 stock that fell to $20, you would have sold at $27.50 and avoided a 33% loss - if you had implemented a "stop-loss" value.

You can also use the "stop-loss" feature to lock in profits.  For example, let's say you purchase a stock for $30 and set the "stop-loss" point at $27.  But as you hoped, the stock price goes up to $35.  That's the time to move your "stop-loss" price up to $34.  This way if the value drops back to $30, you will have automatically sold at $34 - which locked in a 13% gain.  Learn more hear about creating wealth www.abundance-of-wealth.cup-of-life.com .

The basic idea is to invest conservatively, limit your losses, and lock in your gains.