Basic Investing Rules
Investing your money can be a great way to ensure your financial future. With the right investment choices, you can be sure to have money for emergencies, to put towards the education of your children, and to have available when the time comes for you to retire. There is a key word in the preceding phrase however- “right”. If you make the wrong investment choices, you may just end up where you started or worse, flat broke. Most people who invest wisely by making the right decisions with their money follow the same basic investment pattern, although they may define it by another name. It might be that you are the cynical type who chooses to believe that the basic rules could not possibly be as easy as they seem, in an area that seems so complex. It is true. However, that these rules have withstood the test of time.
First of all, make sure that the money you choose to invest is indeed earmarked for the purpose. As in any form of gambling, there is nothing to be gained and everything to be lost when it comes to investing. Do not put up money that you cannot afford to lose should the market take a downturn.
One rule that people seem to refuse to apply in any area of their lives, including the world of investing, is lean not on your own understanding. Most of the time, this is the result of people balking at entrusting another person with their money, believing that with a little understanding they can work the market themselves. This reasoning is fundamentally flawed. In the first place, most people will not be able to begin to unravel the complicated graphs, pie charts, and statistics by which the investment world relates its information. In order to understand what the numbers mean, you will need to have some basic training. There may come a time after you have had some experience in the market that you will be able to make sound decisions on your own, but the initial get-your-feet-wet phase is not the time to attempt it. Check the background of the adviser you choose, as there are a lot of brokers out there looking for a quick fleece. The best brokers will have years of experience, a variety of investment backgrounds, and will probably cost you much less than you might think.
Think long term. Unless you invest millions of dollars initially, it will take time for your investments to mature and begin to accumulate substantial gains. The best investments are proven over time, and thus it is best to place your funds in long term choices. The details of this are plain- it is best to forget about this money in terms of a cash fall back, at least for a number of years.
Diversification is an oft-flogged truism of the investment world. A good portfolio will include cash and cash equivalents (GICs, fixed annuities), growth investments (stocks), and growth and income investments such as mutual funds. Diversification ensures that you do not have all your eggs in one basket should any part of the market experience a downturn. Note that diversification means not only investing in several areas, but also making sure that no one area contains a disproportionate percentage of your funds.
First of all, make sure that the money you choose to invest is indeed earmarked for the purpose. As in any form of gambling, there is nothing to be gained and everything to be lost when it comes to investing. Do not put up money that you cannot afford to lose should the market take a downturn.
One rule that people seem to refuse to apply in any area of their lives, including the world of investing, is lean not on your own understanding. Most of the time, this is the result of people balking at entrusting another person with their money, believing that with a little understanding they can work the market themselves. This reasoning is fundamentally flawed. In the first place, most people will not be able to begin to unravel the complicated graphs, pie charts, and statistics by which the investment world relates its information. In order to understand what the numbers mean, you will need to have some basic training. There may come a time after you have had some experience in the market that you will be able to make sound decisions on your own, but the initial get-your-feet-wet phase is not the time to attempt it. Check the background of the adviser you choose, as there are a lot of brokers out there looking for a quick fleece. The best brokers will have years of experience, a variety of investment backgrounds, and will probably cost you much less than you might think.
Think long term. Unless you invest millions of dollars initially, it will take time for your investments to mature and begin to accumulate substantial gains. The best investments are proven over time, and thus it is best to place your funds in long term choices. The details of this are plain- it is best to forget about this money in terms of a cash fall back, at least for a number of years.
Diversification is an oft-flogged truism of the investment world. A good portfolio will include cash and cash equivalents (GICs, fixed annuities), growth investments (stocks), and growth and income investments such as mutual funds. Diversification ensures that you do not have all your eggs in one basket should any part of the market experience a downturn. Note that diversification means not only investing in several areas, but also making sure that no one area contains a disproportionate percentage of your funds.
Thanks for the article guys. Keep up the awesome work on the site. Looks better everyday.
ReplyDeleteQuite an interesting article. It's good to have the basics to help well manage your finances and to help invest.
ReplyDeleteGreat share...I have always learnt not to invest a sum I cannot part with..I only invest money I can part with..This tips will be of great help to me...Thanks a bunch
ReplyDeleteAwesome tips to help any one take an informed financial decisions. One just need to invest wisely and on only profitable ventures.
ReplyDeleteThis is great advice for safe investing. I agree that your judgement will improve over time. It's definitely important to think in terms of realistic ventures that you can prosper or recover from.
ReplyDeleteFollowing the rules sounds very clever, especially when it comes to investing money. Is betetr pay someone who can guide us in how to invest insetad that risking lost everything.
ReplyDeleteThank you!!! At least we have now the 101 or the very basic to these things. Rather than just an article detailing trends and all. A rookie like me could use this.
ReplyDeleteA topic like this on safe rules for investing is really important for me. I've really struggled with finding the right avenues and ways of investing so that my money can grow. I truly should not lean on my own understanding, it's very little.
ReplyDeleteA big problem with majority of the investors come because we want instant results. I now understand the importance of investing with longterm mentality..
ReplyDeleteTo be a successful investor you have to think like an investor. These are simple but helpful tips that can build you up as an investor.
ReplyDeleteThanks for the tips! I will definitely keep these in mind when I decide to invest.
ReplyDelete