Although the straightforward fact of investing is that there is risk, wouldn’t it be wonderful to have great investing success without any risk? However, this risk can be minimized with a plan, knowledge, and experience over time, and the end result is a very effective way to achieve your financial goals. The kind of plan you should use really depends on what works best for you. You might prefer an aggressive strategy with potential higher returns but higher risk, or you might prefer a less aggressive strategy with lower returns but higher risk, or something in between. You could also prefer investments that mostly take care of themselves and only require occasional attention, or you could prefer to be more involved in your investments and always know exactly what your money is doing. While there is no real investment strategy or secret, these straightforward advice may contribute to your success.
Tip 1: Goal setting is a very effective investment strategy because it provides you with the means to set a goal, gives you direction, and helps you get motivated to do the things you need to do to get the result you want. Setting motivating goals is completely up to personal preference. You might be motivated to have 20 investment properties in your portfolio or to make enough money back from your investments to buy a luxury yacht. There is no right or wrong goal; all that matters is that it motivates you, gives you something to aim for, and gives you direction.
Tip 2: Do Your Homework Due to the potential risk associated with any investment, it is essential to complete your homework. You wouldn’t go to a car lot without a specific car in mind and buy the first one you see; rather, you would do your research first, right? For instance, you would have established some criteria, and you might be looking for a car that meets all of your requirements—it should be dependable, perform well, and appeal to you. The same is true when it comes to investing: you probably won’t get the best results by investing in the first shares or properties you see. Doing your homework on the stock market may involve looking up press releases or news articles about a company you are interested in and examining the stock price’s history. For a property, you could investigate the neighborhood, determine the previous sale price, and have building and pest inspections performed. You can do a lot to ensure that you are making a good investment decision; if you do your research, you will do better than most people.
Tip 3: Invest on a regular basis Investing is not a scheme to get rich quick. To be truly successful, you must invest on a regular basis. Getting into the habit of regularly adding to your investments and putting the money where it can do the most good for you is the best way to build wealth that can be measured. If you put $10,000 into a share account and get a return of 20% on average every year, in ten years you may have earned $2,000 per year, but you will only have $10,000 in that account after account keeping fees, inflation, tax, and other losses, resulting in a total wealth of $30,000 However, if you reinvest that $2,000 annually, you will have a total net worth of approximately $62,000 in ten years. That’s $62,000 in your share account right now, which could earn you $12,400 per year at 20% interest, as opposed to the $2,000 you’d still be earning in the other scenario. While this may not include losses in either scenario, the goal is to emphasize the advantages of regularly recharging your investments.
Tip 4: Keep an Investment Diary Keeping track of your investments can help you learn about the strategies that work best for you and provide insight into why an investment performed so well or poorly. If you have the right information that you can always look back on, you will be able to make better investments in the future, reducing risks, increasing potential returns, and increasing your chances of succeeding in investing. The following information might be useful to record:
The research you did to find the investment; the investments you turned down and the reasons you gave for doing so; the reason you chose the particular investment; the strategy you had before making the investment. In the case of an investment property, you can note the agents you used, the renovations you did, and the contractors you used for the renovation.
If you’re making an investment in the stock market, you should look at the stop loss margin, profit margin, and stop profit loss margin that are in use to see if they can be changed to lower risk and increase profit potential.
Tip 5: For those who haven’t seen Anchorman, Diversify Diversity is a joke about diversifying your investments, which is an effective way to manage risk and increase returns. Your age, income, and investment objectives should all factor into the type of diversification strategy you choose. For instance, if you are young and just starting out with investments, you may benefit from investing your assets in stocks with long-term potential and stocks with greater risk and potential returns. However, you may also face the possibility of taking on more risk. Moving your assets into income-generating investments like bonds or utility stocks may be more beneficial if you were approaching retirement. A portfolio of equal parts of various investment vehicles like bonds, local stocks, foreign stocks, and real estate could be part of your diversification strategy. You could then adjust each vehicle once a year to maintain the same asset distribution by distributing gains from winning investments to losing investments.
Tip 6: Have a Plan and Stick to It Having a plan and sticking to it will help you overcome the many distractions and challenges that can throw you off course on your journey to investing success. Whether it begins with merely fundamental objectives, milestones, tactics, etc. The goal is to figure out where you want to go and what you need to do to get there. As you get more involved, you’ll be able to tweak and fine-tune your plan to make it work better. For example, if you want to own five investment properties in five years, you could figure out that you need to work an extra five hours a week, cut some costs, and get training or the knowledge to figure out how to do it right. This would be your plan. One of your goals might be to have at least one investment property each year. It is not the end of the world if you fail to reach one of your goals. Simply go through your records, figure out why you didn’t reach your goal, and rethink your strategy accordingly. Although you should reward yourself, let yourself know that you’re doing well, and rewards are a great motivator as well, even if you do achieve your milestone, this does not mean there is no room for improvement.
Tip 7: Do your homework, make a plan and stick to it, and diversify to effectively manage your risk are just a few of the advice that can be given to you. Additionally, it is possible to manage risk by first determining the risks you face; obviously, losing money is the most common risk associated with investing. However, what exactly is it that causes you to lose money? For instance, property investing carries the risk that the property’s value will not increase as intended or that you may not be able to rent it out, while stock market investing carries the risk of a stock doing the opposite of what you actually intended it to do. You can begin devising a strategy to manage the risk you’ve identified once you’ve identified the factors that could cause you to lose money on an investment. Avoiding the risk entirely and looking for something else, attempting to reduce the risk, or simply accepting the risk are all ways to manage your risk. Regardless of your strategy, you should always keep an eye on the risk and look for ways to reduce it.
Conclusion In conclusion, success in investing can be achieved by employing a combination of the aforementioned strategies. However, you should not limit yourself to these strategies; investing is a process of continuous learning, and no investor knows everything there is to know about it. After determining what works best for you, simply go out there and give it a shot to succeed in investing.