Have a Three- to Five-Year Time Frame
Any time you buy a stock or stock-based ETF, be thinking in terms of at least three to five years. You may not end up actually holding the investment that long, but every step along the way, you should be thinking, "Is this something I want to own in the next three to five years?" If you lack a meaningful time frame, you're gambling on short-term outcomes that you can't control. The longer you give a healthy business to perform, the more "control" you have over the outcome.
Always Be Ready for the Fat Pitch
Sometimes, investing is about earning steady returns while waiting for that really fat pitch that puts your returns far over the top. While you're waiting, you want to keep your portfolio growing gradually, so you can succeed even if that fat pitch doesn't come along. But if you stay in the game, you're likely to encounter a handful of fat pitches every decade — and they can make a large difference.
Being diversified is the only way to achieve success over the years. Owning various sectors and assets ensures you'll have exposure to any that do well — and at various times, most of them eventually will; you just don't know when. Nearly as important, diversification gives you peace of mind. If your portfolio is too concentrated, volatility can shake your confidence at the worst times. To that end, you should own as many of its positions as you can. For proper diversification, I suggest owning at least 12 stocks across various industries, as well as some stock-based ETFs. Once you own more than a few dozen stocks or so, the benefits of diversification can start to diminish.
You should diversify because you never know which positions will do well and which won't. You will always have losers when you're investing in stocks; what's most important is how your portfolio performs overall, despite those losses. Peter Lynch said, "In this business, if you're good, you're right six times out of 10," suggesting that 40% of your investments will lose money. Don't beat yourself up about that; it's just part of investing. Focus on how your portfolio does as a whole, learn what you can from your losers, and move forward happily when you have profits overall. The bottom line is that losses are an inevitable part of the landscape. You can't keep them from happening; you can only control your reaction when they do.