The New England Patriots began their training camp today, beginning what every team hopes will be a six-month journey to the Super Bowl.  I’ve always found the strategy and intricacies of football interesting; players and coaches literally spend 60 to 80 hours per week preparing for every game, evaluating their own team and other teams, installing new schemes and so on.

But what do these professionals do for the first couple of weeks at camp?  Practice the basics!  That’s right–even though most players were on the team a year ago, even though they’ve been playing football for the past 20-plus years, even though they’re some of the best conditioned athletes in the world, these players go through basic blocking and tackling drills to start.

Recently, I’ve been receiving a lot of, shall we say, novice emails from readers.  And since I think the next major move in the market will be up–after a few weeks of bottom-building–I wanted to spend a minute reinforcing some basics that will help any investor improve their portfolio’s results:

1. Cut your losses short. The only sure way to make money in growth stocks is to make sure no single stock (or two or three) will destroy your portfolio.  To this day, this remains the most important rule in growth stock investing, yet it’s the hardest to follow.  Don’t ever average a loss!

2. Respect the market’s action. Way too many investors just look for stocks without considering the market’s major trend.  If you’re in a bear market, 75% of stocks are heading south, so you must be defensive during those times.

3. Low-priced stocks are low-priced for a reason. Yes, you can make money in low-priced stocks if you have in-depth research and a proven system.  But most people don’t have either-they just want lottery tickets that they believe could pay off big.  Yet they almost never do.

4. ALL stocks eventually top … and they top when the news is good. Most investors have a hard time letting go when a stock has been “good” to them, especially when positive news comes out.  Well, get over it.  A stock is not your child, and furthermore, you can always buy it back if all appears well.  It’s OK to take some chips off the table (some, not all) as the stock works its way higher.

5. Think contrarily. What’s the main reason most investors have trouble making money in stocks?  It’s because the market is a contrary animal–it acts nearly the opposite of how an intelligent person would.  Thus, when the market looks terrible, you must train yourself to expect better times ahead.  And when all appears wonderful, it’s probably a good idea to take some profits.

6. Most important … watch your portfolio! Most investors, shockingly, view investing as a hobby.  But you need to treat it as a business, or if you like, as a second, part-time job.  You have to give thought to your portfolio, your strategy and (very important) your risk.

I actually talked to a subscriber last week who, partly because he wasn’t paying much attention, has seen his good-sized account fall by 60% in the past few weeks; he was heavily margined in a bunch of stocks that have broken down.  Such a drop is devastating, and can take years to recover from.

So give your portfolio some thought; this is your hard-earned money we’re talking about.  Don’t put all your stocks in one basket, commit to cutting all losses short, and know how much risk you have (i.e., how much would you stand to lose if a stock, or the market, fell 10% overnight?).  It doesn’t take more than a few hours a week to keep track of things, but doing so will greatly improve your returns.

This is taken from the July 24 issue of Cabot Wealth Advisory written by Michael Cintolo.