Golden rules of investing
Considering that the very concept of “investing” came to the post-Soviet space quite recently, the number of newcomers in this business goes beyond the limit. Based on this, a number of typical mistakes (rakes) of a young investor can be identified. And we will probably start with start-up capital, so ...
7 Golden Rules for Successful Investing
Rule 1. Constantly increase your investment capital.
Investing requires money, and the total amount of this money must constantly grow, otherwise it will not be possible to call it investment. As a source of growth can act as a means deposited from the main salary, and the resulting profit from the already invested funds (investments).
In many materials there is a figure of 10%, which should be deferred from salary, but as for me, this is all individual. Everyone chooses how much he can save, without compromising the quality of life, but more on this in the next paragraph.
Rule 2. Do not invest the last money.
Any type of investment carries increased risks, so by investing your last money you risk staying with nothing. You should always have a stock of money for basic needs and family maintenance, for at least a few months, or even years. But there is something worse than losing recent savings, see the next paragraph.
Rule 3. Do not invest other people's money.
There is nothing worse than being someone's debtor, especially when you are a decent person. Investing borrowed capital - you are doubly at risk, since having lost it, you will have to look for money to repay the debt to the lender. Another question is if you have where to return from, but then why do you need credit money?
Rule 4. Having an investment strategy.
An investor without a strategy is no longer an investor, but a gambler. You must have a plan of action (preferably fixed on paper) for any possible situation. In this case, you unconditionally must adhere to it, and make adjustments only when the market is closed. A change in strategy “on the go”, or during investment decisions, is often caused by various emotions or investor’s excitement, more on this later.
Rule 5. No excitement and emotions.
I often mention the phrase “Investing should be boring.” Indeed, if you want to be successful, then investing should turn into a routine for you. Not a single investor has been helped by either excitement or human emotions; therefore, a smart investor will never go to “Wah Bank”, but will carefully increase their investment capital.
Rule 6. Do not store all eggs in one basket.
Investors call this a word "Diversification". Let me explain with an example: Knowing our banks, would you choose to invest all the money in a 1 bank or distribute it into several banks? Of course, I would not invest in banks at all, but in this situation I would choose several banks, since the probability that everyone will "burst" is less than the probability that one will do it.
Another important point, newbies often make the mistake of doing diversification for the sake of diversification. Let me explain: having read that it is necessary to diversify investments, they begin to actively look for where to invest, while often investing in untested or unprofitable investment instruments, purely for the sake of diversification. As you guessed, nothing good comes of it.
Rule 7. Assess profit and risk correctly.
Investing is a long-term process, so immediately kill your appetite so you don’t have to give up. There is even such a saying - “Expect the best and prepare for the worst,” so a smart investor should always know how much he can earn and how much to lose in order to stay afloat.
I hope you really will help this "parting words for beginners" and you will not fill yourself other people's bumps. Learn to risk justified, successful investment!