March 16, 2024

Investments: Basic Rules to Know

The world of investments is frightening.

Often, newcomers who have just embarked on the path of investing ask themselves many questions.

For such readers, we have prepared a collection of basic rules of investing.

Investments: Basic Rules to Know: eAskme
Investments: Basic Rules to Know: eAskme

Basic Rules of Investment:

Determine the financial objective:

Investments begin with the goal that the investor sets for himself, the horizon, the duration of the investment, and the acceptable level of risk.

All further actions will depend on this.

Better to have a realistic and understandable purpose of investment. For example, "I'm investing so I can save for a vacation".

You know how much money you need for a vacation. And therefore, you will be able to calculate the required level of return and the investment period.

Sort out your credits:

You can't make investments with a side load of credits.

Pay off your debts first, and then welcome yourself to the financial markets.

Otherwise, you can drive yourself into an even bigger debt hole.

Choose entry-amount:

To invest, you need start-up capital.

You can start with any amount, but a small investment will not bring tangible income, even if the stock market favors you.

That's why you should start to form a passive income if you are ready to risk larger amounts.

The larger the entry amount - the larger the substantial profit will be.

Create a safety cushion:

Set aside some money for a bad day.

Count your average monthly expenses and multiply them by six. That's the size of your stash.

To keep it from being eaten up by inflation, convert it into hard currency, invest in gold coins like American Gold Buffalo, or leave it on a bank deposit.

It is not advisable to invest this money, and it is better to keep it at arm's length.

Count your money:

Evaluate your budget.

Think like a finance minister: the treasury consists not only of income but also of expenses.

Be sure that you earn more than you spend and have a reserve fund ( airbag we told you above).

Only after that can you invest.

Keep regular contributions:

Once you choose, the size of the investment is not enough.

It is preferable to invest regularly, with reinvestment of profits.

In this case, the financial instrument, over time, will begin to grow compound interests, and it will turn even a modest starting amount into a significant passive income.

Don't rush:

For newcomers and those who do not have a huge budget, we recommend starting with short-term investments, where the result can be assessed already at a small distance - up to one year.

This will help minimize the risks of losing investments.

Also, during this period, you will be able to get a basic level of practical knowledge, which will help change your approach to investing in general.

Don't forget about diversification:

The guiding principle of the prudent investor is diversification.

Buying stocks, bonds, gold, and currencies will give you more protection than an investor who keeps all his money in one asset.

Don't get fooled:

Choose a well-known and reliable broker or management company, and you will not have to face fraud.

In particular, it is better to take well-known companies when it comes to holding currency or bank accounts.

Conclusion: And the most important thing.

Good investments are not roulette or lottery.

If you want to get rich quick, buy lottery tickets and wait for a miracle.

And the investor adds to his capital gradually.

Chasing quick results is the most common mistake that leads to losing money. Investing is a process.

The sooner a beginner understands this, and the more successful the results will be.

If you still have any question, feel free to ask me via comments.

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