Some may doubtfully ask – are there rules when it comes to success in financial markets? The thing is there are no rules or recipes, or step-by-step instructions, but there are a golden collection of concepts you should follow in order to maximize your success in the investment field. Improvise, learn, take reasonable risks and reach big financial goals!
So, here are the TOP-12 rules of successful investing from world’s most experienced financial experts. Grab them all and adjust your current investment strategies.
You should never become too excited over your occasional profit. The market’s behavior is often unpredictable and you may catch unforeseen profit just because of the price spike. Investors and traders say it’s the worst thing which can happen to a beginner in investment. Such easy money make investor more tolerant to risk that eventually leads to total loss of his funds. Never try to repeat your “luck” profit and never let emotions, irrational thinking and excitement take over you when it comes to money making and investing.
This rule is widely known on the market but only a few know that this rule was initially established by famous investor Warren Buffett. He said that you should prefer investing and buying shares of the excellent company at a fair (low) price, rather than choosing fair Companies at an excellent price.
This rule teaches investors to think strategically. Overcome the temptation to catch a situational profit, if it makes you sacrifice your strategic plans.
The price of a really good and worthy asset will go up sooner or later, while the price of junk equities will inevitably plunge, dragging you into financial catastrophe.
Rule # 3.
Keep in mind TOP wealth-building types of investments. The first and foremost type is the investment in stocks. You will barely find a wealthy person who has not had invested in stocks in order to multiply the fortune. The most famous and one of the richest investors Warren Buffett says that stocks is the shortest way to the financial independence.
The second shortest way to big money is investing in Real Estate whether thought the direct investment or via exchange traded funds (ETFs). The last but not the least way to invest with the biggest potential return is small business and start-ups.
Always diversify. Diversification of risks is the key element of any investment strategy. It doesn’t matter whether you are a risk-taker or conservative investor. Diversification allows keeping the whole portfolio in a healthy balance, without putting under the risk all your money or opposite – without letting your money stuck in too conservative and low-income assets. The healthiest proportion is 50% of low-risk and stable assets (treasury bonds, corporate bonds, etc.), 25%-30% of high-risk and high-yield vehicles (stocks) and 25-20% of alternative investments.
Understand your investment vehicle.
You may hire the best investment experts in order to give you timely advice, but nothing beats your own “sense” of the market which is only possible when you know and understand vehicles you invest in. By saying “understand” we mean understanding what key factors influence the asset’s price swing so you can not only react to constantly changing data, but also make predictions based on those factors behavior.
Let’s say if your job is related to a medicine or Real Estate it would be the best choice for you to opt for stocks of medical, biotechnological or Real Estate companies.
Learn how to invest without brokers to escape fees.
It’s quite easy to start investing without having a broker who will charge you high fees for its services. There are few ways you can (for example) buy stocks with no brokerage account. Here you will find a helpful guide on how to act successfully on the investment field without using a broker.
Don’t follow the market’s panic.
It’s a well-known fact that panic on the market is often created by big players in order to provoke other traders and investors to sell the assets due to a rapid price decline. Right after the stock or currency or another financial instrument reaches its low the “bigger” fish starts buying it massively, triggering its price growth and making other traders buy it as well. Guess who gets the profit and who loses the money. Think and behave strategically.
You should only react when the price drop is caused by real microeconomic reasons or negative corporate data.
Pick moderate investment strategy over aggressive one.
Whatever strong your hunger for profit, don’t jump into high-risk assets. The high-yield investment vehicles are normally too volatile and can turn the whole portfolio into a catastrophe. High-risk instruments should only be a part (30%-50%) of the entire pool of equities to diversify and stabilize the low-yield assets.
Buy and hold rather than trade.
At all time the “buy and hold” strategy was the most profitable and wealth-building. Take a look at the most successful investors who have bought shares of the most well-known companies decades ago. They have resisted a temptation to sell shares when the price was high enough and they didn’t follow the panic on the market when the price plunged to its lows. Buy and hold the shares of a potentially successful startup and it will pay off in few years.
Consider “lows” as your opportunities.
In times of market’s depression, many investors make a mistake by selling assets on fears of losing all the money. The most successful investors claim, they’ve earned their biggest profits by buying assets on their “lows”. Consider crisis and “bottoms” as an opportunity to buy stocks/commodities at the best price. This will bring you an impressive profit, just be patient and wise.
Remember about taxes and pick vehicles that give you taxes benefits. For many years investing in Real Estate was one of the most attractive in terms of tax advantages. Along with Real Estate, some types of bonds, assets of Exchange Traded Funds, Muster Limited Partnerships can contribute in your taxes reduction.
Revise your investment portfolio every 12 months.
Everything changes, especially investment environment. Some securities and assets that used to bring you high profit turn into a low-yield burden you should better get rid of. Real estate segment may thrive or fall down; precious metals may skyrocket due to the upcoming financial crisis and so on.
Pay close attention to geopolitics and domestic macroeconomic factors to adjust your investment portfolio accordingly. The best period to revise the portfolio is every 12 month.