Who comes to your mind when you think of successful investing?
One name: Warren Buffet.
He is undoubtedly the greatest investor of all time and is well-known for his low-volatility returns over a very long period. The name ‘Buffet’ is synonymous with remarkable business acumen, and making incredible stock picks.
One of his favorite investment advices:
“Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.”
When it comes to investment, you and your friends and family may have different opinions. This can be really overwhelming.
So what do you do?
Keep all those qualms aside and focus on expert advice like that in the book by John Bogle, Enough.
Here are seven investment tips that will assist you to meet your financial goals.
1. Only Invest in What You Understand
What is the point of buying a stock, a mutual fund or a bond when you don’t understand it completely?
As Warren Buffet rightly points out a lot of people get into complex, expensive, risky investments, only to be unpleasantly surprised when things don’t work out for the best.
A great deal or a good investment opportunity is of no use if you don’t understand the way it works. Moreover, that is only going to affect your decision of choosing the appropriate sector for investment.
By not having the required information or by being unclear about where you want to put your money, you won’t be able to make the right move. In this case, there’s one important step that needs to be taken: steer clear of investments that you don’t comprehend thoroughly, or else it would only lead to huge losses. For example, if you think you may look into purchasing gsk shares or similar stocks and shares, you’ll want to completely understand the company, your potential investment and the potential profit/loss you could end with.
The proverb ‘ignorance is bliss’ holds no stand in the investment sector.
2. Plan for Automatic Investments
Making small investments in individual companies, mutual funds or stocks each month can go a long way in helping you achieve your financial goals.
All you need to do is plan for a set amount of money to be automatically invested into an investment option of your choice every month. This way, you build wealth over time without bothering with daily monitoring of investments.
There are a lot of mutual funds that offer automatic investment plans wherein each month a fixed amount of money is automatically deducted from your bank account and invested in a mutual fund of your choice.
3. Keep Up With The Market Trends
Image Credit: www.flickr.com
Make sure you stay informed about what’s going on out there.
Seek out reputable print, radio, television and online sources and keep up with the market trends and the world economy.
You should understand the various aspects of investing, whether it is a mutual fund, a gold investment or a rental property. You should be clear about how and which sector you plan to invest in.
By keeping up with the trends, you will be able to get a better insight of the market conditions and timing perspectives that may influence your future investment decisions.
4. Diversification is Important
The stock market can be unpredictable. Investing solely in one sector can be highly risky. How about putting a little here and little there? A well-balanced portfolio can go a long way in decreasing your losses in a volatile market. Investing in overseas markets is also a good option.
Diversify to protect yourself from massive losses. Being diversified provides the potential for a smoother ride, says Jimmy Lee, founder and CEO of the Wealth Consulting Group in Las Vegas.
5. Track Investment Fees and Expenses
It’s important to know how much you are paying as expenses when investing.
By knowing what you’re paying, you can make better decisions about your investments, reducing the drag on your investment returns net of fees.
If you’re working with a financial services professional, you should know how they’re paid. There are various different compensation models including hourly fees, assets under management, commission-based models or a flat fee for a specific financial plan or service.
6. Think Long Term
Short-term profits appeal to those who are new to the market.
On the other hand, by adopting a long-term profit plan you will achieve steady success over time. One reason behind the success of long term investments is investing early. The longer the money stays invested, the more potential it has to grow.
On the other hand, those who delay investing for years often hoard up that money to buy what they want, which they confuse with something they need.
Colton Dillion of the Acorns online investment site says, investors who start early, practice patience and stick to a long-term investing strategy often get the best returns and financial success.
7. Stick to One Strategy
Think with your head and not your heart – that’s the key for profitable investments.
Various tactics that can help you achieve financial success, but the point here is to find your strategy and stick with it.
An investor who keeps switching from one plan to another will probably experience the worst, rather than the best, of each.
Constantly switching strategies, effectively, makes you a market timer, and this is definitely a territory most investors should avoid.
When it comes to investing, there’s one golden rule – keep an open mind. Don’t neglect anything on the basis of its current position in the market. You never know, neglecting certain small-cap stocks today could also mean neglecting some of the biggest gains of tomorrow. These tips intend to shed light on the various aspects of investing. Upon carefully considering these, you will be able to make wise investment decisions.