7 rules of a novice investor! Important tips for investing
I am sure that many people at the word “investment” think about the following: ” Why do you need to invest at all? My savings are under the pillow and I’m happy with everything. ” At first glance, there is a rational grain, because, with this method of storing their funds, the risk of their loss is minimal. But, in fact, if you chose this tactic, you immediately lost.
The fact is that any money that is in your hands instantly enters an unequal race with inflation and begins to become cheaper (and if you take into account the instability of the national currencies of the countries of the former CIS, they really get cheaper right before our eyes). At the same time, the official inflation rate, which you are told on TV, can be multiplied by 2-3 times. I’ve always been interested, experts who are engaged in calculating the level of inflation, generally go shopping?
Thus, having received the money, you can: spend it, save or invest (the purchase of assets I include in the investment). And, if in the first case you exchange money for goods and other values necessary for a person to live, in the second case, the money simply evaporates. And only the third way allows you to save or increase your savings.
In this article, I collected 7 tips or investment rules, which, in my opinion, should be adhered to by any investor.
1. Diversify.
Diversification is the main rule of successful investment, which allows an investor to reduce his risks. According to this rule, you need to use more than one investment tool, but several (and the more, the better).
That is, if you, for example, decided to invest a large amount in the PAMM-account, then this approach will turn out to be wrong. It is better to split this amount into parts and invest it in several different investment tools, for example: PAMM-accounts, HYIP-projects, real estate, mutual funds.
It is also necessary to use diversification within each individual instrument. For example, in the case of PAMM-accounts, you need to distribute the deposit between different accounts, choosing executives with varying degrees of aggressiveness and conservatism, if possible.
2. Understand where to invest.
People always want to do less and get more. This peculiarity of human character and investment did not pass. Beginning investors want, without spending time studying, investing and getting a stable profit. I think this is one of the main reasons why investors do not make a profit and lose money.
If you do not take into account fortune, the best investor will be an expert in the area that is the subject of investment. People who successfully invest in real estate, the dog ate on real estate. And those who invest in sites, ate the same dog on the sites.
Therefore, before investing in an investment tool, you need to thoroughly study it. The more knowledge and experience you get in this area, the higher will be the chance of successful investment of money.
3. First, display the body of the deposit and only then you can reinvest.
If your investments entail more or less serious risks, then you should stick to this strategy. And it consists that to deduce a body of the deposit it is necessary as soon as possible, despite of a temptation to proceed immediately to reinvestment.
And the temptation here is really great, for example, you have invested Rs. 1,00,000 in an investment project and receive an income of about 5 000 per month. If you start reinvesting income, then in a year your deposit will be Rs. 1,60,000 and the income will already be at the level of Rs.7,000 – 8,000. And after 3 years, the income will increase to 20,000 per month.
This approach allows increasing the profitability of the investment instrument, but, on the other hand, it also increases the risks of the investor. Therefore, it would be more rational to first “repulse” your costs. And when the amount of payments exceeds the initial deposit, you can proceed to reinvestment.
4. Reinvest with the mind.
After the deposit is “repulsed” you can reinvest a different percentage of the profit: from 1% to 100%. Personally, I think that it’s best to stay at 50%. That is, you can take half of the profit to yourself, and invest the other half back into the project, increasing your deposit.
5. Do not invest in borrowed capital.
Beginning investors often can not properly assess their risks, they are too confident in their success and therefore very much at risk. One of the most ill-considered acts is investing “foreign” money. It can be a loan, borrow from a friend, etc.
This should not be allowed, because in case of failure you not only will not get profit from investing, but you must stay. Then where can you borrow money for investments if you can not borrow?
Learn how to save and save, find additional sources of income, increase your professional value. In addition, many investment instruments have a low entry threshold. Therefore, beginners can be trained on small amounts.
===== 6. Use wisely the profit from investing. =====
The profit from investing can be spent in different ways. Someone buys passives on it (car, smartphones, equipment, etc.), and someone buys assets (what brings profit or grows in price, for example, real estate) or invests in new investment tools.
I would advise you to do both. On the one hand, you have to make money work, on the other, if you do not spend money on yourself, then the motivation and meaning of their earnings are lost.
7. Do not make a decision on emotions.
A successful investor always makes decisions with a cold head. Various investment projects will try to deprive you of your cold head, turning to emotions.
Do not rush to make a contribution, think it over long and carefully. If you are considering the prospect of investing a large amount, you can make a small timeout for a few days, take your mind off and then start thinking about the matter with fresh thoughts.
It is important to be able to turn off emotions and analyze all risks solely by reason. And do not be too optimistic about your predictions. Always consider the likelihood of a worse outcome of events.