Investment Principles
By adhering to the principles discussed below, you can improve your performance and reduce possible risks.
The main thing is to work according to a certain algorithm, and not be guided by only one emotion.
1. Long-Term Investment Prospects
Investing should always be forward-looking, which means it should be long-term. Remember the rule: it is impossible to invest money today and start gaining from tomorrow.
For example, let’s take the value of any stock as a basis: today it is growing, tomorrow it is falling, and in 5 years it will increase 5 times. The effectiveness of any investment is measured in years, but not in days or months.
2. Careful Study of the Financing Instrument
Before you invest money somewhere, be sure to analyze this area. It will not be superfluous to talk with those who have already worked in this segment and have achieved certain results.
3. Personal Opinion
No matter how good and competent outside experts are, always have your own vector of development. If you understand that this direction is interesting, and you feel that you can work in this area, then do not fall for the general trends of fashion. Work out your own vector of development, and maybe in a few years you will become a pioneer.
4. Know How to Stop
But despite the previous advice, always use your resources wisely. Don’t let adrenaline drive your decisions. You should always be able to say stop. It is one thing if you have just invested, another thing if investments in a business have not been generating income for a long time.
In this case, you need to say stop, at least take a break, switch to something that can really bring money. Not being able to switch to another direction of activity, you can never achieve success. Another thing is that you don’t need to jump from one direction to another either.
5. Do Not Hurry
You cannot make a decision relying only on emotions. You should always give yourself time to “cool down”. This will allow you not to succumb to your own and others’ opinions. In addition, this way you can deliberately weigh the pros and cons, make a rational and correct decision.
As psychologists advise, before you buy something in the store, you need to leave and wait out the time. If the desire remains after, then you can safely buy. If not, then there is no need to rush.
Pick winners. If we consider investing in the acquisition of shares, then it is best to always invest in those companies that occupy leading positions in the market or at least have development prospects. It is not worth investing in stocks of companies that are known to be unsuccessful.
6. Think About Tomorrow
Never be guided in your decision-making today. For example, we made a profit today, and let’s withdraw it. This is not the mindset of an investor. A successful businessman always thinks about the future, about what to invest in tomorrow, having received it today.
Before we tell you where you can invest money, we will reveal to you a few more tips from experienced experts who can help you achieve the desired result and maximally protect you from the risks of losing your savings.
Expert Tips for Successful Investing:
- Try to avoid taking risk for part of your investment as much as possible. Experts advise that approximately 30% of your savings should always be directed towards something that will be 100% profitable. This can be a deposit account, the purchase of precious metals, investments in rental property, etc.
- Create permanent passive income. Income may not always be active, that is, it cannot always be felt and felt. Allow yourself, if funds are available, to invest them in securities. You can make good money on stocks and bonds.
- Separate investment methods (diversification). As stated earlier, always diversify your portfolio. It is clear that all directions will not be winning, but also losing.
- Highly profitable investment. There are some areas of investment that immediately promise high returns. It is necessary to include such investments in your portfolio, but in a certain proportion of the total volume of investments. Otherwise, you can either win or lose everything.
- Check the information. Never invest in something you know nothing about. Before investing, you need to check everything, analyze, and only then make a decision.
- The main types of investments and their classification
Now we turn to the most important thing – where is it profitable to invest money? The question is not so difficult, the main thing is to understand the variety of financial instruments offered on the market. And if the concept of stocks and bonds is familiar to the majority, then the very classification of such financial instruments is not known to everyone.
Depending on the Investment Object, There are 4 Types of Investments:
- Speculative. That is, those on which you can make money by reselling them.
- Financial. A striking example is securities, that is, this is a kind of investment in financial instruments.
- Venture. That is, it is associated with the prospects for the development in the future of certain areas of human activity, for example, know-how, new technologies, etc.
- Real. Associated with the contribution of funds to real objects, for example, to real estate.
By Investment Term
If we talk about the investment period, then investments can be conditionally divided into three types:
- Short-term – up to 1 year;
- Medium-term – up to 5 years;
- Long-term – more than 5 years.
Depending on the form of Ownership
Classification by form of ownership is considered from the point of view of the investor’s involvement in a particular category of entities. For example, money can be invested by an ordinary individual, or by a foreign company. Therefore, there are three categories of such investments:
- Private, that is, by individuals;
- Foreign – by non-residents;
- State-owned – by state-owned companies.
By Risk Level
According to the level of risk, investments are also divided into three groups:
- Conservative investments. Lowest risk.
- Moderate risk investments.
- Aggressive investment. Greatest risk.
In the first steps, it is better to avoid aggressive investments, although it is possible to diversify the portfolio in this way, but only in small quantities.
By Investment Purpose
Depending on what is meant by investing funds on the part of the investor himself, investments can be divided into 4 classes:
- Straight. They are invested in a single direction with direct financing.
- Portfolio. A diverse portfolio is created, filled with different types of investments.
- Intelligent. Diverse startups, know-how, etc. This is a venture capital investment.
- Non-financial. When investments are not connected in any way with finances, for example, investing in their own education.
Advantages and Disadvantages of Private Investment
If we are talking about the average citizen who currently has a certain amount of funds and wants to invest them in a certain portfolio, then such intentions can have both negative and positive consequences for the citizen himself.
The Pros of Private Investment
If we are talking about the main advantages of private investment, there are several of them:
- This is an opportunity to learn something new and broaden your horizons;
- Get a diversified income that allows you to feel successful always and in any economic condition;
- Achieve the desired goals and results due to the profit received from the investment;
- The ability to constantly renew the invested resources. Unlimited profitability.
Cons of Private Investment
But at the same time, investing is not without its drawbacks, which can be felt by every person. Among these disadvantages should be highlighted:
- The presence of risks. Any activity with investments is associated with certain risks, so it cannot be said 100% that something will be successful and something will not;
- The process requires good resistance to stress. If you are a very emotional person, then this activity may not always be enjoyable;
- It is necessary to constantly read, analyze, and learn something new. If you do not expand your horizons of knowledge, then you can “lag behind” the current market trends and simply lose your income;
- To start, you need capital, which is not always available.
