Become an investment mogul, by applying these 7 rules of investment. “The higher the risk, the higher the reward” only applies when you have done your research and the risk you are about to take is calculated. Putting hundreds of thousands or millions of your money into the hands of people you may not even know sounds strange. But it’s the way to go as far as savings and investments are concerned. So before taking out time to research the company you want to invest in, it’s important you know more about you, the investor.
Companies wind up. Imagine a company winds up 6 months after you invest in them. What’s more, the investor has no idea what he should have done because he skipped the basics of understanding these 7 golden rules of investment. Tough luck, business continues. But investors cannot afford to keep losing money, because sooner or later there would be no money to invest with. Knowledge of the basics of investment takes a lot of time, but it’s worth it. It doesn’t have to be stocks; you could be an Angel Investor or a Venture Capitalist wanting to invest in new companies. So, having in depth details about investing helps you make your decision.
7 Rules of investment
1) Understanding The Business
It is advised you have knowledge about not just the company but also the kind of business they’re involved in. Seeing individuals invest in Cryptocurrency doesn’t mean you have to join the bandwagon. It pays to study the trends before diving into any investments.
Knowing all these and more can help you understand the business and what you are getting into. Most importantly, when money is lost you have an idea why it happened. Guessing isn’t an attribute of an investor, knowing is more like it.
2) Draw A Financial Road Map
What is your financial situation? How much can you afford to lose at that moment? Do you have enough to diversify?
It’s a game of finances and if you don’t possess enough to start, then keep researching until you do.
Never invest more than you can afford to lose. Often times investors put in money while only looking at the positive side without balancing their finances. Remember that the level of risk while investing is unmatched. So, only invest an amount of money you can afford to lose.
3) Build A Psychological Risk Tolerance
Firstly, nobody wants to lose money. And secondly, you need a high psychological strength to watch your money go down the drain, just in case. Most people do not have the guts to watch their investments crash. This is about you now, so build a tough skin and understand that losing money is a big part of doing business.
4) Consider Your Investment Strategy
“Having a plan” is advice that never fails. That is the whole essence of planning in the first place. It’s no longer a case of how successful you want to be in the business but how to achieve the goal. Your strategy could involve investing in penny stocks like Jordan Belfort in The Wolf of Wall Street. Another strategy could be investing in big companies for equity. Whatever your strategy, you need to create, test and rate. Oftentimes, the strategy used at the beginning might not work and changes may have to be made. But when the strategy works, continue to build and improve on it. Investors should never change their investment strategy because it failed once or twice. Emotions can run deep, pushing the investor to change his/her strategy due to long streaks of unyielding deals. But always reconsider your investment strategy, if it has worked for you over time, stick to it.
5) Learn how to diversify
The beauty of investing still lies in the fact that an investor can possess different asset classes. Even though this is a gift package, investors still need to understand how to diversify. The key to benefiting from diversification is being up to date across a variety of markets. The essence of diversification is to minimize losses. So investment opportunities should be carefully targeted for better results. Subscribing to certain investment companies give you all round information for a better decision.
6) It’s Okay To Contract Investment
This is probably the most important rule in the book. Never force investments; if you have a hard time doing it yourself, ask for help. It is okay to partner with investment firms to help you invest and split returns. The investor gets more of the money while the firm gets their percentage based on agreement. So it is okay to get help, especially to ensure a profit.
You have done the hardest part of the job: Done your research, weighed your options, diversified and even probably contracted your investment. Now it’s time to stop overthinking and let the investment breathe. Investments blossom after a while, some take as much as 3 years or even more. Don’t be in a hurry to take out your money due to certain momentary indices. Let the investment grow. Most times “regret” becomes the keyword when investors panic-sell and later realize they should have let the investment mature. Losses come in different shapes, and panic selling could help salvage what is left. But allowing your investment to breathe helps you see what the investment later becomes.
There are certain things to look for in companies before investing. But first you need to be ready for investments. Knowledge of these 7 golden rules of investment helps the individual understand what he/she is getting into, and how to go about it. There is risk in everything, so breathe!