10 Valuable Lessons to Master When Learning About Stocks for Investors

To succeed in the stock investment field, having only theoretical knowledge is not enough. You need to continuously update market information, learn from experienced investors, and accumulate practical lessons through each transaction. This article will summarize the 10 most important principles when learning about stocks, helping you build a solid foundation to develop your investment career.

1. Establish your investment direction early

Before starting, you need to clearly decide your orientation. There are two main approaches when learning about stocks:

Long-term investing: Using the “buy and hold” method, focusing on fundamental analysis of companies, selecting quality stocks to hold for the long term.

Short-term trading: Using day trading strategies, based on technical analysis, catching market news to find quick profit opportunities.

Each approach has different knowledge requirements, skills, and risk levels. Once chosen, stick to your strategy with discipline, avoiding impulsive decisions driven by emotions.

2. Diversification is your protective framework

This is a lesson emphasized by all experienced investors. Warren Buffett always considers diversification as the key to minimizing risk. When learning about stocks, understand that diversification means you should not “put all eggs in one basket.”

This strategy includes:

• Buying stocks from various industries
• Investing in multiple asset classes (stocks, cryptocurrencies, forex)
• Monitoring market indices (S&P 500, VN30) instead of holding only individual stocks

During market downturns, a diversified portfolio will decline less than holding a single stock. Although in strong growth periods, profits may not be as high as focusing on one stock, index investing still offers superior returns compared to bank deposits or bonds.

3. Skills in selecting quality stocks

If you follow the long-term investment approach, choosing the right stocks is crucial. When learning about stocks at a deeper level, study how to read financial reports, analyze the company’s development strategy, and evaluate future product potential.

Characteristics of a good stock:

• Low debt ratio, liquidity ratio (Current assets / Short-term liabilities) over 1.5
• Stable revenue and profit growth over the past 5 years
• Profitability indicators (Profit margin, ROE, ROA) continuously improving
• Regular dividend payments to shareholders
• Reputable management, no history of hiding information

Leading companies like Vicostone, Vingroup, Vinamilk, Hòa Phát have multiplied many times over the past 10 years thanks to solid business foundations and talented leadership. These stocks may not generate explosive profits during hot markets, but they serve as effective “shields” when the market reverses and declines.

4. Flexibly adjust your portfolio according to the market

Even long-term investors need to periodically review their portfolios and adjust weights according to economic trends. The world changes, consumer demands change, and government policies also change.

For example, during the pandemic, monetary easing and interest rate cuts made borrowing cheaper. This pushed real estate prices up, leading to outstanding growth in the real estate sector. However, when the government tightened real estate credit in 2022, housing demand declined, and stock prices in this sector also dropped sharply.

A prudent investor knows when to increase or decrease their holdings to maximize profits in different market phases.

5. Risk control is always a top priority

Whether you are a long-term investor or a short-term trader, risk management is vital. Use stop-loss (Stop Loss) and take-profit orders (Take Profit) to protect your assets.

Risk management tools:

• Stop Loss order (Sell stop): Automatically sell when stock price falls to a preset level, limiting losses
• Take Profit order (Buy stop): Automatically buy when stock price reaches a preset level

An effective rule is to set stop-loss points about 10-15% from the opening price. This helps you manage risks while allowing good trades to develop.

6. Determine buy/sell timing through technical analysis

When learning about stocks in more depth, you will need to get familiar with technical analysis. The two most popular indicators are:

RSI (Relative Strength Index):

• RSI < 30: Stock is oversold, likely to rise
• RSI > 70: Stock is overbought, likely to fall

Stochastic Oscillator (Stochastic):

• Above 80: Overbought, approaching peak
• Below 20: Oversold, about to recover

If you are not yet proficient with these tools, start by observing signals from trading platforms that support automatic analysis based on these indicators.

7. The art of bottom-fishing stocks

Bottom-fishing is an effective way to maximize profits but also very risky. When learning about stocks, learn to recognize signs of a market bottom:

• Prices continuously create new lows but momentum indicators (RSI, Stochastic) increase — indicating selling pressure is weakening
• Prices start forming higher lows compared to previous lows — selling pressure is waning
• Large trading volume during price declines — investors are returning to bottom-fish

However, remember: Catching falling knives is very risky. Use only a small portion of your assets to test, and avoid risking everything. Also, avoid bottom-fishing in penny stocks or stocks trading below par value, as these tend to fall sharply when declining.

8. Avoid excessive borrowing for investing

A common mistake many investors make is borrowing money to invest, especially from illegal lenders with exorbitant interest rates. When learning about stocks, remember the golden rule: Invest only with your available cash.

Instead, you can use margin (margin trading) from reputable trading platforms. Margin allows you to amplify profits while minimizing losses. For example, with 1:20 leverage, you only need $100 to buy $2,000 worth of stocks. In the worst case, you only lose $100 and are not in debt.

9. Continuous practice is the key to success

Warren Buffett always emphasizes: Avoid losing money when investing. To do this, you must constantly learn, analyze stocks, and practice trading. There is no better way than starting with a demo account to accumulate real experience.

By practicing stock trading, you will better understand how the market operates, how to cope with fear and greed, and how to manage profits and losses. These lessons cannot be fully learned from books.

10. Stable psychology is the foundation

The stock market is highly volatile; a position with large gains can turn into losses in just 1-2 days. Therefore, maintaining a steady mindset is extremely important.

When learning about stocks, remember:

• Don’t cut losses impulsively out of fear
• Don’t hold on to positions out of greed
• Analyze the true reasons behind market fluctuations
• Follow your strategy, don’t let emotions control your decisions

Success in stock investing is not about getting rich quickly but about building good habits, managing risks, and continuous learning. With patience, discipline, and a calm mind, you will gradually become proficient in your investment journey.