Investing can be profitable, but if you’re not careful, you could find yourself losing money. Follow these rules for successful investing, and you’ll be able to make sensible investments that can help your money grow.
Don’t Follow the Herd With Investing
The psychological impact of social proof can have a persuasive effect on our behavior. So when we see the markets going crazy for investing in bitcoin, for example, it can be hard to resist the temptation to bundle in and try to get a piece of the pie. However, this investing strategy is almost guaranteed to leave you in the red eventually. The most successful investors make their money by being able to read the markets and gauging a stock’s potential. When everyone else is jumping on a stock, by the time you get a slice of the action, its growth potential for dividend investing may have already plateaued.
Use Knowledge to Give Yourself an Edge
You worked hard to earn your money, and you need to show it the respect it deserves. Before doing any investing, take the time to research the market with investing apps and do the due diligence on the company or portfolio you’re planning to put your money into. There’s always going to be an element of gambling, but the more information you’re armed with from the best investing books, the better you can accurately read the markets. That way, you’ll know when to buy, and more importantly, when to pass on a bad bet.
Invest in What You Know
Don’t invest in stocks; try socially responsible investing in businesses. A stock’s value will fluctuate, but a great business will be able to grow and adapt to the times, to give your investing long-term value. When you invest in a business you are familiar with, you’ll already have a built-in advantage when it comes to deciding on the value of an investment. It could be a business in a field that you have professional experience with; or investing in something related to a hobby or interest where you’ll be able to evaluate the stock with insights gained from a customer’s perspective.
Don’t Attempt to Time the Market
Contrary to the advice of many successful investors and financial planners, a lot of people try to time their investments in the hopes of riding a wave for big short-term gains. While the potential gains can be high, this approach to investing is fraught with dangers and encourages negative investing habits. While an isolated success story grabs headlines, timed investments are impossible to successfully replicate long-term. Save yourself some grief and find investments with real value that can remain stable over time.
Set Investing Rules, Then Follow Them
When all you can see are dollar signs, it’s too easy to let your imagination run away with your wallet. Even in a big economic bull run, market volatility can still snatch investing defeat from the jaws of victory. Coming up with a battle plan for how to spend your financial war chest gives you an investing framework to stick with and help minimize your exposure to losses when they inevitably occur.
Leave Your Feelings at the Door
When stakes are high and your money’s on the line, it’s easy to let your feelings get in the way of making the smart choice. Greed and fear are the two feelings with the strongest potential for damaging your investing chances: greed can lead you to bad investing when falling victim to the allure of high returns without properly researching a stock; if you’re in a bear market, fear can lead you to jettison a stock at a pitiful price that has a good chance of recovering further down the line. Keep greed and fear out of your investing decision-making process, and you’re already ahead of the competition.
Diversify Your Portfolio When Investing
Obviously, with a game of chance like investing, you can limit your exposure by creating a diversified portfolio across classes, assets, and instruments to generate effective returns. This lets you protect yourself in the event that one market takes a hit due to unforeseen events. Shop around to see where your trust investing will go furthest.
Moderate Your Expectations
All investing is fueled by a degree of optimism, but you need to be realistic when coming up with financial goals for your investing activity. While some of your stocks could rise by as much as 50% during bull run years, you shouldn’t be investing on assumptions. Enjoy your successes, but don’t take profits as a given.
Don’t Invest What You Can’t Afford to Lose
If you’re going to be throwing your money at volatile markets, you need to make sure you can weather the blows in a worst-case scenario. Make sure you only invest surplus funds that won’t leave your personal finances exposed in the event of a bad run. Also, it goes without saying, don’t rely on investing in gold to pay the bills.
Conclusion: Look After Your Investments, and They’ll Look After You
If you’re looking for a get-rich quick scheme, then you’ll probably end up investing badly. Discipline, patience, and good sense are the ingredients that produce good investments that appreciate in value and can show resilience in the face of shifts in the market. Investing is a commitment, but if you exercise good sense, then your money will grow. Are there any investment rules that we’ve missed out? Let us know in the comments section below.
Emily Moore is an English teacher with a passion for space and blogging. She believes that current exploration should be focused on preserving our planet’s resources. With satellites circling the orbit, it is easier to get relevant data on any environmental changes. This, in turn, should help people quickly address any challenges.