Golden Rules for Every Investor, or Major Mistakes Newbie Investors Make
The number of those who’re new to our business increases every day. Many of them face a number of typical mistakes (step on a rake) of a young investor. You need to know everything about mistakes to avoid them. Maybe we should start with a start-up capital.
7 Golden Rules of Successful Investments
Rule #1. Constantly Build up Your Investment Capital.
Investing requires money, which total amount must constantly grow; otherwise, it cannot be called investing. The source of growth may include both the funds saved up from base wages and the profit from already invested funds (investments).
The figure of 10% of base wages that should be saved up is common in many information sources, but every case is different. Everyone decides how much money he/she can put aside without negatively affecting the quality of life – read more about that in the next paragraph.
Rule #2. Don’t Invest the Last of Your Money
Any kind of investment involves increased risks, so when you invest the last money, you run the risk of ending up with nothing. However, there is something worse than losing the last of your savings (see the next paragraph).
Rule #3. Don’t Invest Other People's Money.
There's nothing worse than being in debt to someone, especially when you're a decent person. Investing debt capital is twice the risk, because if you lose it, you’ll have to look for money to repay your debt to the creditor.
Rule #4. Having an Investment Strategy.
An investor having no strategy is not an investor anymore, but a gambler. You must have a plan of action (preferably set down on paper) for any possible situation. At that, you unreservedly must stick to it and make adjustments only when the market is closed. Adjusting your strategy “on the go” or in the course of making investment decisions is often caused by various emotions or gambling excitement of an investor.
Rule #5. Say “No!” to Excitement and Emotions.
“Investing should be boring.” Indeed, if you want to be successful, investing should become a routine for you. Neither excitement nor human emotions have helped any investor yet, so smart investors will never go for broke, but they will carefully increase their investment capital.
Rule #6. Don’t Put All Your Eggs in One Basket.
Investors call it “Diversification”. Let’s explain it with an example: if you plan to deposit a considerable sum of money in a bank, would you decide to invest all your money in one bank or distribute them between several ones?
Here is another important point. Newbies often make a mistake by diversifying for the purpose of diversification. Let’s make it clear: after reading that investments need to be diversified, they begin to actively find where to invest, while often investing in questionable or low-profit investment instruments purely for diversification. As you may have guessed, it won’t do any good.
Rule #7. Properly Estimate Profits and Risks.
Investing is a long-term process, so tame your appetite at once not to be disappointed in it later. There is even a saying like that: “Hope for the best but prepare for the worst.” Smart investors should always know how much money they can make and lose to stay “afloat”.
We hope that this “Message to the newbies” will really help you, and you won’t repeat other people’s mistakes. Learn to take justified risks. We wish you successful investments!