To succeed as an investor, you need to learn how to spot and avoid the areas where you’re likely to lose money. Meanwhile, here are some pointers on how to spot those pitfalls—plus the best way to learn about investing.

When you are actively looking for the best way to learn about investing, and preparing to invest more money in stocks, it’s a good idea keep a notebook about stocks you are thinking about buying. Even if you can’t buy, you can still commit yourself on paper. Of course, you’ll have to be scrupulously honest with yourself. (Best to write your journal in ink—not pencil!)

If you keep this journal for two or three years, you should begin developing a sense of when to make buy and sell decisions—“when to pull the trigger”, as professional investors say. This can go a long way toward turning you into a successful investor. You’ll find that you have to learn to make these decisions while there is still some doubt in your mind.

Note, though, that if you only buy stocks after all your doubt is gone and you’re sure you’re going to make lots of money, you will often wind up with small profits if not losses. This seems paradoxical to many non-investors, but it makes perfect sense.

In the stock market, doubt is greatest and investors are most fearful when the market is at its lows. As doubt and fear give way to optimism and confidence, more investors buy and stock prices rise. As prices rise, potential rewards dwindle. By the time all doubt and fear have evaporated, prices are at or near their highs.

Again, if you make a habit of waiting till all doubt is gone before you buy, you are almost certain to achieve poor results. You will be the proverbial “last person to get the news”. Many of your stocks will go down after you buy, and some will stay below your cost for a long time.

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The best way to learn about investing: The right kind of stock research

Stock research is an analysis of investments to find shares that you can profitably add to your portfolio.

When you analyze a stock, it’s important to have an idea of how likely it is to survive a business slump and go on to prosper when economic growth resumes.

A number of factors can help you to do that. These include how much debt it has, and the interest rate on that debt, how sensitive it is to economic cycles, its strengths and weaknesses in relation to competitors and so on.

As well, we recommend using these 4 stock market research tips. They can help you cut risk—and increase profits—in your stock portfolio:

1. Look beyond financial indicators.
2. Think like a portfolio manager.
3. Hold a reasonable portion of your portfolio in U.S. stocks.
4. Give your investments time to pay off.

Be honest with yourself, and never rely on luck. It may seem simple, but it’s the best way to learn about investing.

One of my most valuable investing rules resembles something I learned decades ago, as a teenage poker player.

When you sit down to play poker, the first thing you do is try to spot the sucker. This is the weakest player at the table who continually “feeds the pot”—throws more money in than he or she takes out.

One key difference between suckers and better players is that the former generally have an unrealistic or at least inflated opinion of their own poker-playing ability. When suckers lose, they attribute it to a run of bad cards or a handful of poor playing decisions.

In contrast, better players are brutally honest with themselves. They understand that luck evens out over long periods. They know they will always lose in the long run to players who have more native talent for the game and who spend more time playing it and studying it. Consequently, they try to find poker games in which they are among the better players. They understand that this is what makes it possible for them to win.

This basic idea also applies in certain areas of investing, where the average investor just can’t win. These include stock options, short-term trading, new stock issues, and concept stocks.

Fortunately, in the stock market, long-term growth takes the place of the sucker.

One of the big investing rules that never changes is that the stock market tends to go up 8% or so every year—on average—over long periods. That potential average profit of 8% yearly provides a cushion and a source of profit for average investors. However, that gain is not spread out evenly throughout the stock market. Instead, you’ll find clumps of potential profit in some market areas, and an absence of potential profit in others.

To succeed as an investor, you need to learn how to spot and avoid the areas where you’re likely to lose money.

Instead, focus on areas where you have a chance of tapping into that yearly 8% profit, if not more. A great deal of investing success comes down to learning how to play in a way that puts the odds in your favour.

What was the best way to learn about investing for you?

When you learned about investing, what was most helpful in learning about the right stocks to invest in?