Updated: Oct 16
Let's speak plainly for a second. Investing is using your money to make more money. Very plain, very simple. Investing done properly will not lose any money. "Risk" just means that anything is possible and nothing is certain, but investing should never lose money. That's rule #1.
Investing is about making a thesis that an investment will increase in value. It should involve a specific reason, and is usually detailed with financial calculations trying to approximate the value that's added. An example is something like this:
"I think Apple stock will go up because the new iPhone looks awesome and everyone I know plans on getting one."
That may not be perfect, but it's a good start. It recognizes a pattern among ordinary consumers that money can be made on. It identifies that if his or her friends are buying one, it could be a trend, and maybe they should do a little bit of research into how many people think the new iPhone is cool.
And each time an investor buys a stock, they should have a specific reason. Professionals are usually required by their companies to produce a 10-100 page document outlying the reasons they should buy or sell the stock.
Another warning, this is more unique to me and is certainly not widely believed by the investing community, but diversification is a myth. Investing is about making independent decisions on stocks (or other investments). The success of one investment does not affect the success of the others, so diversifying for the sake of "reducing risk" has no impact. Because they are completely independent of each other, and also why would anyone invest in a company that they believed would decrease in value?
No diversification does not mean "go all in". Be responsible. The best investors had lots of great ideas, one for each investment they made. That's truthfully all it takes, and a bit of luck.