Most of us still have memories of our mothers stashing money in weird places back in the day — some of us benefited from stumbling on them as kids (if you know what I mean.) Saving was more predominant while investing was left for the wealthy, and if you own some stocks, omo you have arrived.
Only the rich could afford to own an investment portfolio, as this entails having a large sum as capital, a stockbroker who would earn an exorbitant fee on his portfolio, and several time-consuming procedures. The ordinary man could not afford these luxuries, so they merely work, spend, save, and repeat, while the wealthy man keeps his fortune.
Thanks to the recent advancements in fintech solutions, a wide range of investment opportunities are now open to everyone to invest and grow wealth even with little money. However, having access does not always guarantee success in investing. The rich go the extra mile by following some standard rules. Here are 7 of them.
Here are five golden investing rules you can adopt on your wealth-building journey.
Map out an investment plan.
Our situations are unique, and so are our goals. What works for one investor may not work for you. Before investing, assess your current situation and future goals, including your income, career, travel plans, family, risk tolerance, and time horizon. These will help you determine how much you can invest and how often as well as the type of investment to stake your money in.
Remember to periodically review and adjust your investment plan along the way to determine if it still suits your goals and needs. Talk to a financial advisor.
Never buy all at once. Never sell all at once
To maximize your profits, stage your buys, work your orders and try to get the best price over time. If your goal is to buy 10,000 units MTN shares, you can buy it in units of 1000 while trying to get the best price.
Stay Consistent.
It’s important that you continue to invest over time, in good or rough time, even if you it’s only a little amount. By continuing to invest regularly, you’ll learn the habit of living below your means as you build up a nest egg of assets in your portfolio over time.
Have an emergency fund.
The concept of making money from investing can become thrilling that you get tempted to put in all your money for more returns. Be careful not to give in to such temptation. Always have money in easily accessible savings account to cover unexpected life events. You can ensure that you always have adequate cash for emergencies by automating a small portion of your salary into a savings account.
Don’t put your eggs in one basket.
Diversification comes in various forms — the types of assets you buy and the individual assets within each class. Putting your money in different assets and investment types can help minimize risks and shields your portfolio from the impact of downturns in any one or more of the asset or market type.
Diversify your investment across asset classes like Stocks, Bonds, treasury bills, Real estate, etc.
Stop timing the market
Smart investors understand that time in the market is more important than timing the market. The idea here is that you need to stay invested for the long term to get strong returns instead of jumping in and out of the market.
Make compounding work for you.
Compounding lets earn returns from your returns. If you have no urgent need for income from your investments, you may want to consider reinvesting it to buy more of your investment. Doing this will help increase the value of your investment and boost your overall returns. Bear in mind, however, that reinvesting income from capital appreciation or dividends rather than taking it as cash means you risk losing it or seeing its value fall — or rise.
Read Also: What is Compounding and How Can it Work for You
If it seems too good to be true, it is.
Beware highly speculative investments that seem too good to be true. Be careful not to follow the herd and try not to fall into the trap of investing because other people are doing so.
Similar article: Common Investment Red Flags Most Victims Ignore
Only invest in what you understand.
Warren Buffet used this rule to become the wealthiest investor in the world. His mantra: Never invest in a business you cannot understand. Warren believes that as an investor, you must understand the company you want to invest in and know if it is within your circle of competence or not. You must align with its values and trust its growth potential.
The only way to know this is to DO YOUR RESEARCH properly. Research the products, the financials, the leadership, the trends, and everything that makes the company you are about to invest in tick or suck.
The good news: You do not have to dive into the investment pool alone. The research team at Parthian Parthian securities has eyes on the market and can give you valuable insight to help you make better investment decisions. Subscribe to the Parthian newsletter for stock market updates, company updates, investment tips, and more
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