A good investor does his homework and takes the time to select a good company with a solid plan. To do this, he needs to be on top of the latest news and trends in the industry: what’s hot and what’s not. He should also know where to get information about specific companies, including how they are performing in terms of stock value, total revenue, net profit margin etc.For an investment to succeed, the investor needs to follow four basic rules. They are the corner stone to investment success.
Set Clear Objectives
The most important rule for investors is to have clear objectives. This means being able to identify what you want. Basically, this means knowing where you’re going before you start out. It’s very hard to make investments without knowing where you’re headed.Investors must be able to determine how much of their assets they are willing to risk before deciding on an investment opportunity and which assets they will choose – stocks, bonds etc.
Set goals should be achievable with the time and money allocated. The goals should also be do-able at a reasonable cost. They should also be time-bound: an investor should be able to determine what the timeframe is for achieving the goals. Having clear objectives is crucial to investment success.
Minimize Costs
Investors need to keep track of their expenses. In order to do this, it’s important for them to know what costs are involved with different investment strategies.To make the most of money, investors should look at where they are going to invest and plan the strategies accordingly. To determine how much money is available for an investment, investors should know how much they will cost in terms of funds required, taxes and fees etc.Investors should ensure that the amount of money they need to invest is reasonable when compared to the interest rates charged by different investment opportunities.
The investment should provide returns that will allow for a profit and also ensure that the money invested is protected.Wise investments reduce losses that would otherwise have been incurred. The amount of money an investor should invest is determined not only by the returns but also by the fees charged by different investment opportunities.
Maintain High Level of Discipline
A disciplined investor is one that invests within the budget he has set. The most important thing in maintaining discipline is to know exactly where his money is going.
An investor needs to know how much money he will be able to put into different investment opportunities.A good investor sticks to the budget he has set. He knows the level of risk he is willing to take, and he follows it. This is the most important rule for an investor because if he doesn’t stick to his budget and starts spending money he hasn’t planned for, it’s easy to get carried away with speculation and lose money.
Investors should take advice impartially. They should also ensure that the advice they get is sound. For example, if a company has been doing very well and its stock value is going up, it’s easy to make an unfounded judgment that the company will continue to do so.An investor needs sound judgment to be able to maintain discipline. He must also establish whether the advisors he takes advice from are impartial and trustworthy.
Diversify Investments
Investment should be done in a manner that ensures that risk is reduced. Investors need to make sure that the investment opportunities they choose spread their money across different companies, industries, asset classes and countries. This way, if things don’t go their way in one area, they will still have their money invested elsewhere.If an investment involves a lot of risks, it’s important to spread the risks by investing not only in that company but also other investment opportunities.
Investments can be spread across various fields such as stocks,bonds,real estate etc. This is the most important rule since it protects against underperforming investments.
These four rules form the cornerstone for investment success. Investors take their time to do a good job in setting out their objectives, staying within the limits of their budget and judging investment advice they are given. A good investor is also committed to his discipline and he can diversify his investment. These factors will contribute to successful investments.