Knowing the rules for good investing is what separates winners from losers. The good news is that they are straightforward, and anyone can follow them. The rules will help you to make the best investment decisions and preserve your wealth.
Good investing is the only way to make the amount of money you require to achieve your business objectives. When individuals who are new to the game fail, they blame everyone for failing to teach them a hidden success formula. But the truth is that all you need to master are the simple rules for good investing. Here are the most important ones:
1. Set Goals
Lack of goals is the number one reason many investors fail even after reading many rich books on this subject. The fact is that once you set specific goals, the rest will automatically fall into place. Good investing for beginners may involve reading good investing books. What are good investing books? They are resources that can help a beginner to set specific, measurable, achievable, relevant and time-oriented investing goals.
2. Pay Yourself First
Good investing in business requires that you pay yourself and then save. Otherwise, if you plan to save whatever is left after paying all other expenses, you will almost surely never invest. Money is a scarce resource.
3. Invest in What You Know and Believe In
Peter Lunch, one of the most accomplished fund managers and bestselling author, once said, “Invest in what you know.” If you fail to follow this rule, you will lack the power to ignore any short-term fluctuations. A good example is the firefly’s investor, Max Polyakov, who wants to build smaller rockets than SpaceX. He has already put over $150 million into rocketry, which shows he believes in the industry.
Good investing involves taking risks. So, the best way to be a good investor is to mitigate risks by investing in developing a diversified portfolio. This way, if a few of the investments fail to perform, you will still have some wealth.
5. Never Borrow to Invest
This rule appears to be a no-brainer. But many people still ignore it. If you don’t invest your surplus, a small hitch in the market can cause you untold financial difficulties.
6. Match Investments to Risk Tolerance
People have different levels of risk tolerance. For example, a highly-paid professional with significant assets and secure employment cannot purchase the investments as a retired couple living on a fixed income. Remember, assuming less risk is wasteful, and assuming more is dangerous. If you have good investing ideas, your risk tolerance level may increase.
7. Think Long-Term
Create systematic planning systems to be able to build long-term wealth. Most people fail since all they want is to get huge returns in the next 4-6 months. But if you want substantial returns, you have to be patient. Warren Buffet once said that successful investors only buy things that they can perfectly be happy to hold if the market shuts down for ten years.
8. Pay Less Tax
Tax is a non-productive expense that you will incur in life. But there are often legal ways to reduce it. If you are unsure, consider seeking legal counsel to save some of your hard-earned cash.
9. Exploit Investor Psychology
The best way to make fortunes is to sell when everyone else is buying and buying when they are selling. You must develop the ability to side-step the madness of the moment and focus on your long-term goals to realize this goal. Moreover, you need to have a thorough understanding of the market to avoid making the wrong decision.
10. Know When to Stop Investing
If you are using an ineffective investing plan, you need to stop investing in protecting your money. When the plan is not performing as expected, it’s time to evaluate it. The same applies if you are an ineffective trader who creates great plans but cannot follow them.
Understanding each of these simple rules for good investing and how they can help you establishes a stable business. Investing is hard work. Only investors who have the discipline and patient, have good ideas for investing money, and follow these rules, can maximize their income despite the prevailing market conditions.
Which of these ten rules have you applied, and what was the outcome?
Author’s Bio: Emily Moore may have been born with business in her DNA. She’s a freelance writer, programmer, and just a woman, who loves and understands the business and the latest technology. She purchased an entrepreneurship book at the age of 17. She also bought her first stock barely a year after that. This accomplished investor follows a value investing strategy. She also loves sharing her experience with other investors to spur them to make the best investing decisions.