Are you looking for a way to achieve financial security? Yes? Then you are in luck! Investing and saving are two sure ways to get that financial security you have always wanted.
Investing? No, that’s way too risky, you may say.
Without any doubt, investing is risky and there is little to no guarantee you will get your return on your investment. However, you can achieve your goals by following investment facts and rules set by experts such as the investment god, Warren Buffett.
Unlike investing, saving is a lot easier but the problem here is that your money is basically stagnant. It doesn’t grow as much as you want and need so this will not make you rich. If you want to go the Buffett way, putting your money in the bank simply will not work.
So, here is a quick investing guide from the investment god, who also doubles as one of the biggest business magnates in the world and the 4th richest man alive.
Firstly, make up your mind to invest
We already know investing is a risk. Therefore, in order to start this journey on investment, you have to prepare your mind to be willing to take any form of risk in the future, so you can get optimum results. Usually, the younger you are, the more risk you will be willing to take. This is why starting investment at a young age is important, nevertheless, when you are older you can still invest in less risky areas. When you think about investments, you have to keep your emotions under control. These may lead you to making bad decisions. Therefore, you have to be rational. Although difficult to put into practice, experts advise you to always strive to remain rational and calm when dealing with your investments.
What to invest on
This is one recurring question young investors burden themselves with – what should I invest in?
While it may seem like a billion-dollar question, the answer is, in fact, very simple. Basically, you have to invest in a business where you have a vast understanding. Finding a business that you can understand may take some time but placing your focus on the industry you plan to invest in is very important. You should be able to understand how the company revenue works, the business model, and everything there is to know about the company’s finances.
Focusing on the industry you want to invest in helps you understand how your investment functions. To minimise the risk associated – of course, you cannot eliminate the risks completely – you should wait until you completely grasp the working model. Don’t risk it!
You must have an Emergency Account
As you embark on this overly daunting yet exciting journey, keep in mind that you will need an emergency account for (well, as the name implies) emergencies.
Setting aside an emergency saving will help you in cases where you need funds urgently. You should always have an emergency fund that should cover up at least most of your expenses, irrespective of where and how long you decide to invest. This will prevent you from going into unnecessary debt. Having a sensible emergency fund gives you peace of mind and freedom. Don’t sleep on it.
Have a long-term investment plan
The longer your investment plan, the better the potential compound interest effect on the original value of your investment. It is simple math. For short-term investment, the return value is only a little higher than your original investment. When you reinvest, your interest keeps increasing, unlike the short-term investment which gets you instant profit. Global investment legend, Warren Buffet once said: “our favourite holding period for shares is forever”. Thus, an investor who puts aside money over a long period of time is more likely to achieve goals of financial security compared to someone who goes for short-term business and quick profit. Want a bigger ROI, then give it some more time.
This has got to be the most important tip there is. Before investing your money into any company/ business, you have to pay attention to their valuations to know whether your investment will be lucrative or not. In order to ascertain a company valuation, you can compare the business with other competitors. Get to know the company’s recent sales, reviews, and financial history. By doing so, you will have an idea of whether you are on the right track or not. You should be able to keep track of how much one is able to earn and also how well the organisation takes and handles risk. Based on this, you can obtain an accurate prediction of how the company could develop in the near future.
Right time to invest
To become a successful investor like Buffett, you need a great deal of patience. Market timing and investing, when used concurrently, guarantee good returns over a period of time. That said, I would like to quickly add that knowing the right time to invest could be very hard. Time to invest can happen instantly or even take some months or years. When an investor can correctly guess when a market will go down or up, then you can make investments that will generate maximum profit in the process. Keep your eyes on the market!
Don’t follow trends
Following trends can end up causing loss while investing. Although experts are great guides, it is advisable to know what you follow. Fact or trend?
Don’t just follow experts and forecasts. Be mindful when you are told to buy or sell. You have to watch the market closely and only listen to those you know and trust. Don’t forget that at the point when experts say buy or sell, every investor will want to buy or sell and there will be nothing left to buy or no one to sell to. Hence, caution is advised in times where the market is booming. At this point, making rational decisions will be your only chance of becoming a successful investor. Don’t follow trends blindly!
Never, and I repeat, never place all your capital in a single asset. Diversifying helps you reduce risk to the lowest possible minimum. Investing in different sectors lowers the risk of losing since all the businesses can’t run at loss at the same time. As the overly used yet insightful idiom states: Do not put all your eggs in one basket.
A study by the University of British Columbia (UBC) in Vancouver revealed that less-experienced investors put themselves in financial risk because they don’t diversify. With respect to truly diversifying, you have to hold a portfolio of investments with low levels of correlations. Although every investment varies in different conditions, opting for more than one asset plan can help your investments either increase or decrease. Plus, consulting a certified professional on diversification would be very helpful. You should totally consult an expert. You can’t be too careful, right?
Attaining financial security is one of the most challenging tasks to take on as an adult. Fortunately, we have experts like Buffett setting the trail for us to follow. With these rules, I am hoping you ‘kill it’ at your investment game this year.
If you found this blog helpful, please click the share button and signup up to our newsletter to have an update on our latest blogs. You can also check out my previous blogs such as “Wise Investment Tips For Intending Investors“. Also, do not hesitate to share your stories on investing with us and let us know how this guide helped you. We are anxious to hear from you. Bon chance!
Recommended books for further reading:
- Intelligent Investor: The Definitive Book on Value Investing – A Book of Practical Counsel
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits
- Stock Market Investing For Beginners: The Investment Guide – How to benefit from the crisis, invest in stocks and generate long-term passive income incl. ETF and Stock Picking Checklist
- Smarter Investing: Simpler Decisions for Better Results
- Investing QuickStart Guide: The Simplified Beginner’s Guide to Successfully Navigating the Stock Market, Growing Your Wealth & Creating a Secure Financial Future
If you are looking to open an investment account, follow these links below:
- Passive income
- Silver & Gold coins
- Interactive Brokers
(‘68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.)