Investing: Rules of the Road

Investing: Rules of the Road

You earn your money after working quite hard, burning hours on end for years, and then you are able to conjure up some savings. But this is not true for every single person out there; some have amassed such a heap of money that they don’t need to be here to read all this information that can turn the fate of a commoner around and make him an immense fortune. If you want to get there, then investing is a must.

You have worked so hard for all the money that you have today; now, your money should work twice as hard to serve you financially; thus, the idea of investing comes to mind. Investing allows you to put your money into varied sections, not all of these might allow for overnight growth, but the chances of one are there. Many successful people that you can come across have to share a similar story of persistence, being passionate about investing, and believing in the process. No one gets to be an overnight millionaire; it is a slow process but the one that works.

Investing can lead you to places you never imagined being in financially

The most well-rounded theory about investing is that you should be doing it when you are young and have the time to learn the art; having not much money is not important here. But even if you have had a change of heart at a later age, you can still change your fate by investing little by little and remaining consistent with the process.

There are various types of investments out there, such as ETFs, Stocks, real estate, or even trading different commodities on a daily basis. People have made a fortune with many of these or using a mix of those listed here. The catch here is that some of these investments might grow over time and might not be a persistent source of income, such as real estate, while there are those that can provide you with a real income, such as a dividend that is given to the person holding stocks for a particular company. And in some cases, you get both growth and income.

The literal definition of Investing is “to put money into financial products, property, shares and such with the exception of rounding up a fair profit.” This is what investing is; it doesn’t ensure that you will definitely end up scoring a profit but the fact that you are putting your hard-earned money on the line in the exception of turning over a profit and ‘exception’ being the keyword here.      

Saving vs. investing

Most of the time, investing is confused with saving as both are subject to the involvement of money that will not be a part of your routine circulation, but both are different every step of the way. Saving subjects ironically to the storage of money idly; this money is not in your daily use and is sitting either in a closed vault or in your bank account doing nothing; it will not expand or increase on its own. But in terms of investing, the money that you put into circulation or buy different assets with is working for you and will grow into something with respect to time. Saving simply is the activity of making money sit idly and having the same amount made available to you after a specific time interval, the one that you put aside without any addition or subtraction.

As you have fairly acquainted yourself with the need to invest, what investing is, and how it is different from savings, now is the time to go for the rules of the road with investing that can either make or break your game. So, without further ado, let’s get right into it;

  1. Develop your strategy

The first thing you need to do is lay a proper path for you in terms of a viable strategy that is self-crafted and caters to your investing goals. You need to have some financial goals that you want to achieve, a time slot in which you want to do this, and the number of assets or opportunities that you can invest your money into. This coins as your investing strategy, it doesn’t have to be individual or unique, but it has to be viable with your goals and the timeframe you would like to achieve them.

Your strategy should bring into account the areas that you want to invest in, such as real estate, stock market, startup ventures, or anything particular. Moving on, it should enlist all of your financial goals, i.e., having this much money by this timeframe or expanding your investing regime over a dedicated time. Last but not least, as a way of connecting all the dots should be an actionable plan that provides you with a fair ground to oversee all of your investing practices and that these are feasible and are working in close harmony with your profit goals. This is a consistent, modifiable strategy according to the present market stations and stimuli and provides you to expand your horizon in terms of making your investment grow over time.

  • Understand the risk

Investing is the name of taking a risk, and it is kind of a given that when you invest your money into something, no matter how fail-proof that system or mode of investment be there is always a risk of loss associated with that investment. It is a rule of thumb that the higher the profit you want more intensive the risk you will have to undertake. Even the stocks that are supposed to increase in value over time could deteriorate at an unexpected turn of the stock market, and all of your investment becomes annihilated.

The real estate fund that you have invested in, suddenly the whole market ends up in a change shift, or new government regulations hit, cutting the profit margin on your investment to half or only 50%. This value might be less of what you expected, but factoring in the risk that this investment offered, it is still something. Here experts would want to acclimate yourself with the obvious such as what is your comfort level with the risk, which means settling on an investment sum for a venture that also accounts for the loss numbers included, and you have to be comfortable with these to move forward.

Apart from that, you also need to ascertain the fact that how much risk you are willing to take as it does plan an important role in all of it. The risk factor is the third and last element that you need to ponder on, such as what margin of risk the investment demands and then factoring it with the risk that you can take to find a middle ground.    

  • Diversify your investment

Suppose you have $1000 and you want to invest all of it into the stock market. So, would it be wise to invest in a specific stock and chip in all of your money? Well, according to the experts, this is not how things should go down. You need to divide or diversify your investment by a factor of 25% and make four dedicated shares of it, now invest each into a specific section of the stock market such as using 1/4th of your investment to buy technologically related shares, another to buy food, 25% again to invest into pharmaceutical and 25% into e-commerce.

Doing so will help you diversify your investment, and it certainly decreases the risk of loss as well, as if the food doesn’t pan out, then either technology or e-commerce would and it would be able to even out your earnings for the investment that you have made.

This is one example where you are investing a specific sum of your money into the stock market; taking this example as a foundation; you need to realize that the total investing some of your money should be diversified in the same fashion. Such as rather than investing all of it into the stock market, consider dividing this investment to land into the forex market, some of it into the real estate business, or some of it should go into a government-run savings bond or scheme. This way, all of your investment portfolio gets diversified, and it certainly helps to take some edge off of the loss factor of things.

  • Consider investing for the long term.

Most people might start their journey with investing for a short period of time or until the financial goals they had in mind to begin with, are met and fulfilled. But in reality, this is not the way to go; investing is a discipline that requires you to be patient and be willing to play the game for a long haul. Some of the most exceptional cases might have made a good fortune over the course of two or three trades, but this is not going to be the same thing in your case. So, if you really want to make something out of your investing, then it is advised that you consider it for the long term.

Success in investing is not procured overnight as it might take even a decade to reach the level of stability and consistency that you call success and to reach there, you need to show some stance of perseverance to show that you have really got what it takes.

  • Value quality over quantity

The next thing that you need to account for is the quality of your investment. Such as it is not important how many shares you buy of a specific company or entity as long as it is not significant or viable or has some return ratio, then it won’t pan out for you in a good way. It doesn’t matter how much of it you buy because, at the end of the day, it is not going to help you score any profit at all because quantity doesn’t matter, but it is the quality that matters the most.

The quality investment will pay you out in two ways; first of all, it will increase in value and grow your investment to a lavish number, and then secondly, it favors your portfolio and diversifies it. It might get a little tempting to buy a popular investment that everyone is pitching in for, or it could be the nerves talking, but you need to be reasonable here and not think with sentiment when it comes to investing. It might sound flattering to invest in quantity at first, but the risks might not be in line with your goals that you have in mind with your investing practices. At the end of the day, if it sounds too good to be true, then it probably is, so you need to be aware of that as well.

  • Reviewing your strategy annually.

At the end of the day, there might be hundreds of tips for you when it comes to investing and making sure that your money is efficient at what it can do best which is to multiply and increase in value over time. But nothing is going to help you achieve your financial goals and making a pleasant jump at your investing regime than reviewing your strategy consistently and if that is a problem, then at least do it annually. At the end of each year, you should have your current year’s investing strategy laid out in front of you with all the strong and weak points it has to propose.

Then taking in all that data, you have to consistently make amends at factors that don’t seem to be working and converting these with the latest trends that have taken over around the same year or so. Consistent revisions in your investing strategy will definitely make it more empowering and current with the latest investing and marketing scenarios. You need to do this if you wish to do better in terms of profit rolling over your way and managing an upper hand when the market is taking a tumble.