Four Levels To Consistently Profitable Investing (2024)

Discover Which Investing Level You're At Now So You Can Jump To The Next Level To Become A More Profitable Investor

Profitable investing is no mystery.

Mastering investing skills is similar to learning how to drive a car, ride a bicycle, or even walk.

Do you remember when you first learned to drive a car? You braked cautiously, steered awkwardly, watched the speedometer closely, and got an adrenaline rush from merging onto the freeway.

Now you do all these tasks unconsciously with the radio blaring while talking on the cell phone and putting on make-up or shaving.

Driving changed from a conscious process requiring great effort to something you can do competently without conscious thought.

The four stages to profitable investing are no different.

Inexperienced investors make lots of mistakes because they lack sufficient skills. Each action requires conscious thought and extra effort to implement.

This is completely natural and should be expected. It's part of the learning process. You didn't learn to walk without stumbling, so don't be surprised when learning how to invest includes a little stumbling also.

“If people only knew how hard I work to gain my mastery, it wouldn't seem so wonderful at all.” – Michelangelo

As you gain experience and learn the basics, your skills will grow through each of the four stages of investing until you reach the final level: consistently profitable investing.

Below are the four stages to profitable investing so you can determine what stage you’re at now, and what you must do to reach the next stage of profitability.

The Four Stages To Consistently Profitable Investing

Stage 1 Investing: You begin with “unconscious incompetence” because you don't even know enough to know what you don't know.

Everything is new to the beginner causing anxiety and risk of failure because so much is unknown.

As a result, you usually rely on the investment advice of others. Investing at this stage is marked by no investment plan, inconsistent profits (or even losses), and little concept of how to be on the path to wealth.

“Financially oblivious” is an accurate term to describe this stage. Anecdotal evidence suggests 60-80% of the population is stuck in Stage 1. How about you?

Related: How to take back control of your portfolio

Stage 2 Investing: You've progressed to “conscious incompetence” when you've learned just enough to know how little you know.

You've taken your first steps forward by saving and investing passively, but realize there’s so much more to becoming consistently profitable.

You have the desire to build wealth and play the financial freedom game, but active investing skill and knowledge are still missing. Risk management isn't even part of your game plan.

Your portfolio losses and gains feel out of control and have no relationship to anything you feel responsible for.

You don't even know enough to know why you’re profitable sometimes, and unprofitable others. You blame it on things like tough market conditions, the Federal Reserve, your broker's investment advice, or other causes outside yourself.

At this stage, you've entered the road to wealth, but you still have a lot to learn.

Stage 3 Investing: “Conscious competence” occurs when you know enough about the investing game to get comfortable, but you still have to work at it because you aren't a master.

This stage is marked by a solid investment plan and execution based on proven principles that lead to success. However, you haven't mastered the intricacies of your particular investment approach and/or the approach isn't grounded in risk management.

This causes occasional blunders and losses that could be avoided with greater experience and skill. Your portfolio has reasonable return characteristics, but occasionally experiences undesirably large losses.

These are disconcerting, and point to the next level of knowledge to become consistently profitable.

Stage 4 Investing: “Unconscious competence” is the final stage of knowledge where you know the subject so well it's become your new comfort zone.

Investing has become primarily an administrative task, and you only seek investment advice from others for factual information. You don't base your investment decision on their advice.

You're truly “financially independent,” regardless of your current net worth, because your financial situation is no longer dependent on anyone else.

This stage is characterized by someone who has mastered risk management and knows the intricacies of several non-correlated investment strategies to create a consistently profitable portfolio through all market cycles.

Your wealth is just a matter of time.

Investment Risk Management Is The Key To Reaching The Next Level Of Profitable Investing

When you're ready to advance to the next stage of investment profitability, you should approach the task with humility, expect incompetence, and get your ego out of the picture.

Do you remember the earlier analogies about learning to walk or drive a car? You should expect the mistakes, awkwardness, and anxiety that are a natural part of gaining new skills.

“The person interested in success has to learn to view failure as a healthy, inevitable part of the process of getting to the top.”– Dr. Joyce Brothers

Mistakes are an inevitable reality of investing, and they're usually expensive. Nobody invests perfectly except liars and the self-deceived.

Advancing to the next stage of investment profitability puts you at greater risk of making mistakes because the territory is unfamiliar.

Don't set yourself up for disaster by assuming immediate investment success at each stage of your learning curve. Life seldom works that way.

Instead, the wise investor plans on making mistakes by strategically managing risk exposure.

When your risk is carefully controlled for each investment, then your anxiety is lower because you know that when mistakes occur, or disaster strikes, the damage will be contained.

Controlling losses means you preserve your capital during the tough times so you can stay in the game long enough to ultimately realize your plans for financial freedom.

Investment risk management allows you to move forward into each new stage of profitable investing with confidence and peace of mind.

Strategy for Advancing To The Next Investment Level

Like any new skill, moving to the next stage of financial ability requires education, experience, and solid advice. You must grow your financial intelligence and develop new investing skills one brick at a time.

Sorry, but quick fixes only work in fairy tales and movies.

“Leaders are not born; they are made. And they are made just like anything else – through hard work. And that is the price we'll have to pay to achieve any goal.”– Vince Lombardi

The reality is you will compound your financial intelligence just like you compound money, and together, their combined growth will lead to the financial security you desire.

Related: Learn how to invest like Todd

There's no royal road to this knowledge. You must put forth the necessary effort. The sooner you let go of “get rich quick” ideas and oversimplified solutions, the sooner you'll get on the road to true wealth.

Because wealth building isn't a “quick fix” that you can “get over with,” but is a process followed over time, there are two important steps that will greatly increase your odds of success.

Step One: Develop Good Financial Habits

Build new habits into your daily life that grow your financial skills. These habits include reading investment books, attending financial seminars, or listening to educational CD's.

Similarly, you must build new habits that grow your portfolio such as regular investing, saving, and research.

But how will you find the time and money for these new habits? That's the purpose of the Step Four course from the Seven Steps to Seven Figures curriculum available on this web site.

It will assist you in gaining the commitment that causes you to effortlessly prioritize sound financial habits and stop procrastinating on your financial future. It's how you accelerate your journey to financial freedom.

Step Two: Change Your Environment

You must create new environments in your life that literally pull you forward to financial freedom by supporting your new wealth building habits.

Proactively creating new relationships, networking, and masterminding are just a few examples of the many tools that can support you in persisting with consistent effort to reach your goal.

Related: Better investing through process, not product

The Expectancy Wealth Planning course is specifically designed to help you organize your life so that it literally pulls you toward financial freedom with a minimum of self-discipline or sacrifice.

This step will help you focus your time and money resources on financial freedom, eliminate energy wasting clutter, and arrange your life so that outside forces actually fuel your dream of financial freedom, rather than hold you back.

It will accelerate your journey to wealth by increasing your consistency and persistence.

“There are risks and costs to a program of action, but they are far less than the long-range risks and costs of comfortable inaction.”– John F. Kennedy

Obviously, there's much more to becoming a consistently profitable investor than just these two steps.

Your wealth plan must be based on proven investment techniques, grounded in principles that actually work, and must be congruent with your values and goals.

I encourage you to explore other articles on this site for greater detail, and to examine the entire course series Seven Steps to Seven Figures for the complete blueprint that has helped others achieve financial freedom – and can help you do the same.

You aren't the first person to walk this path, and there are proven strategies that can lead you step-by-step through the process of becoming a more consistently profitable investor.

Our courses and wealth building coaching services can help by educating you, holding you accountable, and supporting your successful design and implementation of the wealth process so you save time and money on your journey to financial freedom.