Important things you need to know before you start investing
Many people like you and me desire to become investors. We see how much money we can make if we take the risk, and we want a piece of it. But what we often forget is that not only do big risks come with big rewards, they also come with big fears and dangers that cost us more than just our money; they may end up costing us our life savings which took years to build. To protect ourselves from these tragic events, especially in today’s time where economic crisis strikes unexpectedly at any time, let us remember these 5 things before we start investing
Investing is risky
Investing is like starting a business of your own; there are good times and there are bad times. During our life, we experience both ups and downs. And when we invest, we always need to be prepared for the down times too. So do not think that you will make money all of the time, because such an expectation would only lead to disaster in the future if you have one or two bad experiences with investments. The golden rule is to never invest more than 10% of your total income, so when things go wrong, you still have plenty left for emergencies or simply for the right investment opportunities when they come again.
Decide which account that you want to invest through
There are two main types of investment accounts you should be aware of. Discretionary accounts are those where the investor decides on how much money to put in and how it will be used. This is good for investors who plan on having a long-term goal because they can set aside a monthly budget on their investment account and forget about it until a later time when they need that cash.
On the other hand, non-discretionary accounts mean that a certain percentage of your income goes into this account every month whether you like it or not. This is good for investors who plan to retire at a certain age and need all the money they can get without touching their principal amount. When deciding which option works better for you, comparing Discretionary versus Non-Discretionary Investment Accounts, it is best to seek professional advice from an expert or even a financial planner if that’s your thing. The good thing about both choices is that they are both safe as long as you do not invest all of your money.
Do not invest all of your money
I was taught that there is a golden rule to investing, and it is never to invest all of your money on any one investment. This means that you should never put all of your eggs in one basket, for example, by putting all of your cash into one stock. The big reason for this is because every time you invest with 100% of the allotted budget, there is no more money left to compensate losses if something goes wrong. You will always be okay as long as you have separate stocks making you profit at the same time and if something were to happen and they cancel out each other out (say buying high and selling low), then chances are that the remaining 10% of your budget will be enough to sustain you.
You need to do your research
You would not want to buy a car without first checking its price or if it is still under warranty, right? The same goes for investing; you should always conduct thorough research before making any investment decision, whether that be stocks, forex, mutual funds, commodities, or anything else. This is because the biggest reason why people lose money in investments is that they don’t know what they are doing. They take risks blindly or trust their instincts which usually end up with horrendous consequences. So instead of taking unnecessary risks, make sure to know everything about your potential investment options first before putting down any money on them.
Invest in your knowledge
Finally, it is important to invest in your knowledge about the market. If you do not know anything about stocks or investments, then try learning more through books and other resources first before jumping into a pool of sharks. This way, you will have a better foundation for understanding investments and how they work before making any decisions on what to put your money into. Always remember that the stock market is just as dangerous as investing your life savings into one single business, so be careful!
Conclusively, whether you are a new investor who is gearing up for the first time, or you are an old veteran trying to brush up your knowledge on investments, there is never enough knowledge to go around. Keeping in mind all the points written above will help you on your road to financial stability and independence.