Principle 1. Avoid losses. Don't speculate.

All great investors will avoid losses by any means necessary. Because if you lose 80% of the value of your portfolio, you need to earn 400% to recover it. And that requires the most expensive resource - time.

So your philosophy should be to avoid losses and not speculate on the one hand, and on the other hand make the money work.

Only invest in what you know best, otherwise you will have one loss after another.

Principle 2. Rational thinking over emotions.

Research by "Fidelity" companies using its flagship Magellan Fund by Peter Lynch as an example:

"Between 1977 and 1990, the fund achieved an average annualized return of 29%.

Yet, the average Magellan fund investor suffered losses! How could this happen?

When the fund's returns tanked, people withdrew money from the fund for fear of even greater losses. When things picked up, people went back in again."

Bias	Description	Examples
Availability	Out of a very large set of financial assets, we often only invest in those that we believe we know best.	If something happens, we'll get a warning call.
Status quo	We regret selling something too soon rather than the missing a successful investment opportunity.	We're upset about selling Google stock early, but not about about not buying Apple stock.
Order	We tend to sell winning positions too early and hold losing positions too long.	I don't record losses.
Confirmation	We tend to seek out information that confirms our beliefs and ignore information that contradicts them.	I believe that IT stocks will rise: CNBC writes about it.
Overconfidence	We often become overly confident in our predictions and overestimate our results.	Overestimating portfolio Return and underestimating Risk

Select assets well and be prepared for fluctuations in their market value. Don't get upset when prices drop noticeably, nor overjoyed when they rise noticeably.

Read about Market Psychology.

Principle 3: Always stay invested.

Many investors often try to predict the perfect moment to enter the market, hoping to catch it at the bottom. The reality is that it's nearly impossible to do so.

To illustrate this, consider the task of finding the biggest poppy in a field.

As you walk in one direction, searching for the largest flower, you can't go back (just as you can't go back in time in the market) and you don't know what lies ahead of you.

The statistics back it up.

The annual return of the S&P 500 index from 1999 through 2018 was 5.6%.

Miss only the top 20 days in 20 years (only one day a year) and instead of 5.6% the AR of the portfolio can become negative.

Timing isn't free and means missed opportunities. Waiting for the perfect moment to enter the market isn't practical. Invest consistently because money should be working all the time.

Rather than fixating on finding the "perfect" market entry moment, it's better to seek attractive investment opportunities while minimizing transaction costs.

Principle 4: DCA.

But many people spend countless hours looking at charts only to find themselves on the losing side of a trade. It's not a good idea to try to determine the time to enter the market

Utilize a strategy that uses both time and volatility to your advantage. This strategy is called Dollar Cost Averaging (DCA)

DCA is the gradual entry and exit of positions over time, rather than all at once.

Whether the market goes up or down, the money is invested and risk is reduced.

The DCA strategy is an investment strategy (not a trading strategy). The strategy works well over the long term. It doesn't matter what the market does over the course of a day, a week, or even a month.

If you invested just $100 a month in BTC starting in December 2017 to the present, you would have $BTC worth $50,545! That's with $8400 invested. That's over 500% return on investment.

Stop trying to get rich by tomorrow and focus on long-term goals.

DCA and time are what you need to build a solid portfolio.

Principle 5: Focus on the long term.

Smart money investors are usually patient and focused on long-term goals.

Building wealth is a marathon and not a sprint.

Over long periods of time, the initial amounts invested with compound interest increase dramatically.

Compound interest is an essential factor in capital growth.

Compound interest refers to the accumulation of interest on both the initial amount and the interest earned, essentially earning "interest on interest", which allows the original investment amount to grow exponentially.

In the formula, you can see that apart from the interest rate, an essential parameter is the time for your assets to grow.

In order for the compound interest and time to work on your side, you need to reinvest your profit in the same or other financial instruments.

If you invest $1 at 20%, it will turn into $868,147 in 75 years. If you invest $1 every day at the same rate, $1,000,000 can be earned in 35 years.

Think of the purchase of Manhattan in 1626 by Peter Minuit from local Indians for approximately $25.

Today, the total value of Manhattan is worth billions of dollars. However, if Peter had deposited his $25 in a bank at 7% interest, he would now possess a staggering $3.6 trillion 😱 – significantly more than the present-day value of the island with all its structures.

Principle 6. Diversify. Choose the right assets.

Diversification is a strategy that involves combining a wide range of investments in a portfolio.

According to Harry Markowitz (Professor of Finance, a Nobel Prize-winning economist), diversification is like a free lunch. Because with an equal level of returns, diversification allows you to reduce your risk, and if you have an equal level of risk, you get a higher return.

David Swensen, the chief investment officer at Yale University, emphasizes that:

"There are only three tools to increase profits. The first is asset allocation. What assets do you intend to put your portfolio in? And in what proportion? The second tool is timing. You try to guess which asset categories will produce more returns than others. The third tool is ensuring safety."

In fact, asset allocation determines more than 100% of your investing success.

The decision on asset allocation determines the returns of a diversified portfolio structure over time by 88%. Asset allocation should not be influenced by the cyclical ups and downs of economies or by some cynic doubting an asset in public.

Depending on your capital-building stage and goals, it is wise to hold 10-30% in digital assets.

Principle 7: Create your own investment philosophy.

To become a successful investor, first of all, one should define the system of focal points – to form one's own idea of financial markets – investment philosophy. An investment philosophy is a wholesome understanding of how markets work (and sometimes they don't) and the types of mistakes you believe consistently drive investor behaviour.

Once you've developed an investment philosophy, you can:

Reject strategies that don't fit your view of the markets (after you've developed your own view within your investment philosophy).
Adapt investment strategies to your needs.
Effectively match financial assets with your individual characteristics.

The key to success in investing is not in knowing what makes Warren Buffett successful, but in deciding on your preferences, investment goals, and risk tolerance.

Summary.

Improve your understanding of how financial markets work or how to evaluate financial assets.
Recognize and overcome emotions in making investment decisions.
Make money work efficiently throughout the investment cycle.
Use diversification, considered the only "free lunch" in investment management.
Define your investment goals.
Apply the effective practices of successful investors (including understanding the mistakes that drive investor behaviour).
Define the balance of risk and return that is optimal for you.
Build an effective long-term investment portfolio.
Assess portfolio performance and make adjustments as needed.