By Timothy Lutts, Chielf Investment Strategist and Editor of Cabot Stock of the Month Report
From Cabot Wealth Advisory  12/4/09 Sign up for free Cabot Wealth Advisory e-newsletter

To you beginners, who are reading because you're looking for a source of good advice you can trust, I say, congratulations. You've taken the first step, which is deciding to take control of your investments, and you should feel good about that. The feeling of being in control (regardless of what aspect of life it pertains to) can bring great psychological benefits.

And, the results of being in control of your investments can bring great financial rewards ... which, of course, is why you're reading this.

But first things first. You don't just step up to the plate and start hitting home runs. It doesn't happen in baseball, and it doesn't happen in investing.

First you've got to pay your dues, learn the way the market ACTUALLY works (not how some pundit tells you it works). My job is to make sure you learn this as painlessly and as quickly as possible ... accelerate your learning phase so you'll start making money (and learn how to consistently make money) as fast as possible.

So today I'm going to give you three short lessons, and then tell you how you can keep learning, with minimal cost and minimal pain.

Lesson 1: Never, ever buy a stock without an exit plan. Your dream, of course, is that you buy the stock and it goes up ... and up and up and up. But dreams don't often come true. So before you even buy a stock you need to plan what you'll do if it goes down. Will you sell quickly, keeping your loss small? Or will you hold on patiently, confident that the stock will come back in time? Both approaches can work, but for each individual stock, one approach is better than the other, and you've got to know ahead of time which one it is.

Lesson 2: Invest in the future, not the past. That's what the professionals do; they care so much about the future that they employ analysts whose sole job is to predict how individual companies will do in the quarters and years ahead. They're frequently wrong, but at least they're trying. And the process of always looking forward does enable them to detect emerging trends and to take advantage of them. Whether you're investing in little wind power companies that are just getting off the ground or giant financial institutions that are getting their houses back in order, looking forward will bring rewards.

Lesson 3: Learn more. This is a good rule for every aspect of life, but particularly for investing, where every day brings new developments. Reading Cabot Wealth Advisories is a great first step. Beyond that, I suggest you visit our Web site, where the EDUCATION section has a lot of great free information. You'll also find a list of our favorite investing books there; buy yourself a few as gifts for the holidays. The vast majority of valuable lessons were learned—and published—long ago. Reading these books will help you learn them with minimal pain.

And now, one final suggestion. If you're looking for advice on what stocks to buy, consider our entry-level investment advisory, Cabot Stock of the Month Report.

More Stock Investing advice:

Two Lessons from Stock Performance Champs 2/11/10
Paul Goodwin finds there's no substitute for buying well and a supportive market.

Ten Tips for Your  Investing Toolkit 12/10/09
These tips will set you on the path of investing success.

Three Characteristics of Winning Investors 11/26/09
Here are three particularly important traits of successful investors.

Three Most Important Investing Lessons 11/6/09
Timothy Lutts focuses on the three most important lessons for successful investing.

Dispelling Investment Myths 10/15/09
Mike Cintolo busts five common investment myths.
Guidelines on Handling Earnings Gaps 4/22/09
Here are four guidelines to help you profit from earnings gaps.

How to Handle Earnings Season 4/19/09
Michael Cintolo offers three options for handling earnings season.

Three Clues to Determine the Market's Next Move 1/22/09
Here are a few clues to watch, so you can be one of the early ones on board the next move...whether it's up or down.

Dispelling Six Common Investing Myths 7/3/08
Avoid some of what doesn't work in the stock market and improve your returns.

Tips on Handling Market Stress  3/15/08
Having a system will help you manage market stress especially when the market's most volatile.

On Improving Your Personal Side of the Investing Equation 2/25/08
Eight ideas to help you improve your personal moneymaking habits from "New Market Wizard" by Jack Schwager.

SNaC to Keep Your Portfolio in Shape 2/11/08
SNaC stands for Story, Numbers and Chart, and it's the method Paul Goodwin uses to pick stocks for the Cabot China & Emerging Markets Report.

Stock Prices: Important and Nothing
It's value and opportunity, not the price of the stock. And then there's December...

Fundamental or Technical Analysis: The Perils of Purity
Following either of these investing styles exclusively can be risky for your total portfolio. 

A Stock, Like Love, Thrives on Romance and Dies on Statistics
If the RP line falters over a period of weeks, you’ll know the romance has ended.

On Investor Sentiment: Run, Sheep, Run
By watching investor sentiment and adjusting your investments accordingly, your investment results are sure to improve.