A couple months ago I posted an article on how I made 40% in under 6 months, and since then I have received several emails asking what my secret to success is; however, the problem with this question is that there is no one set answer. What might work for someone might not work for others, and the market does not react the same at different times. So I have come up with a couple of rules or guidelines that could be used to improve your chances of great returns in that lagging portfolio.

Rule 1: Block out the negative

One of the things I have problems with even today is getting over the fact that a stock just might not work out. If a stock went into red, then I would always feel trapped to stay in the stock until it gained some positive return from it. The problem with that method is that it might take a while before a stock comes back into positive territory and at that point you have already wasted too much time. Time is money, and if you waste it then you don’t give yourself the best chance to make the most return.

For example, if stock A went down 15% in 6 months and then climbed 30% in the next 6 months, then throughout the year you really only made 15%. Although that might seem like a great return for one stock, the goal is for us to reach 40%+. It is important to maximize every opportunity.

So think twice when you keep a laggard in your portfolio. Is this the best play for you, or could your money be more efficient in another company.

Rule 2: Get rid of index funds

I have never really been a fan of index funds, and I have never actually owned one. Index funds are usually for those that don’t want to take the time to actively manage their portfolio. Many times I think several people could easily beat these funds, so why waste your time with them? After management fees and underperformance, you really aren’t going to be making any type of return that will help you get a great return.

Rule 3: Go where no man has gone before

Most of the richest people in the world got to where they were by doing something others don’t often venture into, and the same idea goes for those successful in the stock market. If you just keep buying stocks that people recommend to you, then you will never really experience huge returns because these stocks will usually get burnt out quick. Once everybody wants in on the stock, it is almost a sure sign that the stock will turn negative pretty soon. So you have to look for those diamonds in the rough and stay with the smaller less known stocks.

So overall there are 3 rules that I think should be followed to improve your chances of get nice big returns in the stock market.

• Block out the negative
• Get rid of index funds
• Go where no man has gone before

Remember these are just rules on how to get big returns there are many different ways to get the average single digit returns. In the end, you have to go against the grain of what the average investor does, and it doesn’t hurt to have a bit of luck on your side.

What are some of your great returns? Are there any rules you think should be followed to help improve chances of getting returns?