While there are quite a few people who realize that investing is one of the best ways to get away from living from paycheck to paycheck, most don’t have a clue where to start. That leaves many people watching share prices rather than investing, believing that shares in stocks are the realm of the rich. While there certainly is a bit of risk involved with investing, there are definitely ways to get started without high risk. Today’s blog has 5 Important Rules that will help you to Invest Successfully. Enjoy.
Rule 1: Make sure your stock portfolio is Diversified.
Having a diversified portfolio with 30 different kinds of shares is what you should shoot for. This diversification protects you from any single stock, share or company that “goes under” and, even if a few of them do at the same time, it’s almost an impossibility that all will. It your portfolio is built this way it will, in most cases, outperform any earnings that you might make from a bank.
Rule 2: Never purchase more than $1000 worth of any share until you own at least 30 different shares.
While we’re talking about keeping your risk low, the simple fact is that risking too much money on any one stock investment is never a good idea. Keeping these individual investments small keeps your capital “pot” secure and also can actually lower the unpleasant stress that investing can sometimes cause. Once you’ve reached 30 stocks, and you have some experience under your belt, you can grow the scale of a single investment, but until that happens stick to smaller investments per share type.
Rule 3: Use all of the modern investing tools available online.
There are so many venues today that will give you investing information that not using them is simply unwise. They are free stock market tools that were unavailable even to professional fund managers just a few short years ago, including portfolio tracking, real-time share prices, opinions, news and so forth. Keep in mind that you don’t have to actually use this information (or take anyone’s advice) but learn from it and let it help you to make your own personal financial/investing decisions. Yes, it’s a little bit of work, but who said that making money wouldn’t be work?
Rule 4: If one investment strategy isn’t working, find another.
Simply put, there will always be newer and better ways to pick stocks and shares and old ones will become obsolete or stop working. That’s the way the market works and, to be successful, you should always be on the lookout for the newest methods as the old ones get used up by an efficient market.
Rule 5: Invest for the long term, not the short term.
Many people trade so often that rather than make themselves rich, they simply make their broker rich. The fact is, Warren Buffett, one of the most successful investors in the world, claims sloth as his most profitable investing trait. What he means is that he holds onto his investments for a much longer time than almost anyone else and is slow to sell. The old adage about “slow and steady winning the race” works well for stock market investing.
If you’re looking to use the stock market to purchase a new Ferrari, the fact is that you’ll probably be too old to want one once you make enough money from it to afford one. A better way is to simply look at the stock market as a way to build wealth over the long run and not worry about getting “rich quick”. If you look at the stock market as a part-time job that you’ll have until you retire, chances are that you’ll do quite well.