10 Golden Rules of Investing
One of the world's richest men and the greatest investor of our times, Warren Buffet has many remarkable stories surrounding him. In 2006, Warren Buffet donated 85% of his then 44 billion US dollars wealth to charity. None of us would have the spine to do that. However, Warren Buffet did that and re-attained his position among the richest men in the world.
We all have dreams and aspirations; for some, it may be having a place to call theirs while for some it may be driving their luxury car to work every morning. However, these dreams come crashing down when you realize that you don't have the funds to fulfill them and with your limited income, you probably won't even have the required amount after 20 years. Luckily, these days there is a solution to everything. Investing your money in different instruments is a sure shot way of not just increasing your income but also increasing it exponentially. However, smart investing is important for your money to grow exponentially.
Here are a few points to aid you in investing smartly:
1) Be clear about financial goals
Before investing, always be clear about what you want from your investment and how much return you expect from it.
2) Know your net worth
It is always important to calculate the net assets and liabilities a person has before beginning with the investment process. It will be easier for you invest your money wisely if you are knowledgeable about current investments.
3) Proper research
Proper research is crucial; avoid investing in anything unless you have adequate knowledge about the subject.
4) Never try and time the market
In simpler words, never try to guess which way the stock market will go. Invest today and widen your investment horizon.
5) Always invest in businesses you understand
If you are new to investing, it is always safe to start off by investing in the sectors with which you are familiar. This will help you make sound investment decisions.
6) Diversify your portfolio
Spread your risk across different asset classes. Invest in different types of financial instruments so that even if you suffer a loss in one, it will be compensated by gains in another.
7) Review your portfolio
Always track the performance of your portfolio at regular intervals to check the performance of your investments. Also, an analysis may be required may be required on special occasions like marriage, etc.
8) Factor in inflation when calculating returns
Very few investors comprehend the influence of inflation on their investments. Factor in inflation to know the real value of your income and investments
9) Be prepared for contingencies
Always ensure that a few investments are in the liquid state; these can be withdrawn at short notice to meet any emergencies. Don't lock in all your funds for a long time.
10) Emotions should not dictate investment decisions
Never get carried away by emotions while making investment decisions. Be realistic and rational when making such decisions related to investment. Always be realistic about your expectations. Don't build castles in the sky; don't base your financial goals on unrealistic expectations.
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