Why would you want to invest?
In a financial sense, investment is a purchase of an asset with the intent of generating passive income from it in the future.
All of us do it on a regular basis, but on a much smaller scale: by investing in new electronics, education, entertainment and even custom essay writing services, if the situation calls for it.
Every experienced investor follows a set of simple guidelines. Even though the economics are a complicated system, these guidelines can be useful for the majority of investing situations. They can be helpful even when coming up with a new lucrative strategy or when you are trying to become a major player in the market by investing into improved brand awareness.
There are countless things you can have a stake at – real estate, stocks, putting money on deposit, etc. You are free to pursue your economic goals by any investment strategies you like, but each of them has a particular set of twists and nuances.
Accumulating wealth with investments is a very challenging and risky task. First and foremost, assess and evaluate. Projects with high rewards tend to have the biggest risks attached to them, and only a select few of business people can afford to tackle those.
Ethical investments are an interesting side of this as well. Ethical investments are made to improve the overall quality of life (environmental and social benefits) on top of monetary gain. An interesting distinction from regular investments.
How to succeed?
To raise your capital and not lose much money in the process, you will be required to do tons of investigation and additional reading — investments are a perplexing field. There are some simple suggestions to follow; these were forming for a long time, over the years, built up by more experienced investors.
This experience will set you on the right path by providing you with fundamentals and presenting you with basic tools which are needed to succeed. Vital, if you are a beginner or only interested in basic investment advice.
Top 5 investment tips that push you to the top. Are you up for the challenge?
1) Know where your money is.
You can’t invest into anything out of thin air. To do so, you need to possess sufficient funds for the endeavor.
Basic accounting is always helpful as well. You need to separate your personal funds into strict categories and make sure they never overlap — the total amount of your monetary possessions and your private reserves in case of emergencies. Be financially responsible.
There are simple accounting tools you can use, or you can always put it down to writing.
You should be capable of answering all the relevant questions about your financial operations if the need arises.
- How much is in your possession?
- Where is the asset located?
- Where are your reserves and capital?
Also, don’t use every last dollar you have, devote only a disposable part of your monthly budget.
There are many essentials you need to pay for and buy on a regular basis.
If you invest every last bit of your money, you may not have enough to sustain your lifestyle. Leave enough for the essentials like food, rent, and other conveniences.
Then again, this suggestion can be useful to any person as a daily exercise, since being frugal is never a bad thing.
But for an investor or a person who’s dealing with finances consistently, it’s a total necessity.
Also, don’t borrow money and use it as an investment! Only use your own funds.
Nobody is insured from any losses, no matter how successful you think your investment campaign is going to be. There is simply no way to know, so to avoid any accumulating debt and any troubles with creditors, only use the money you control completely.
2) Put more funds back into the project. Expenses must never exceed profits.
To paraphrase, you must spend less than you earn, and use a part of your income (10%-15%) by reinvesting it back into your project to increase the capital. Even if you spend just as much as earn, your investment will stagnate and get no further development, which is unacceptable. You should always strive to increase your capital since investing is a continuous and methodical process.
Establish it as a personal goal, to reinvest a portion of the profit back into the project to promote future growth. It will increase your operating budget and help develop a more comprehensive investment strategy.
3) Diversification. Don’t invest everything into a single project.
Diversification is essential in avoiding massive risks. Putting the entirety of your investment into a single asset is a perilous undertaking. And as such, it should be consciously avoided.
The golden rule of investing – Don’t hold your eggs in one basket! There is a widespread need to keep a couple of options afloat, in case any unforeseen consequences pop up.
As an example, a hypothetical situation. You invested your money into a single asset. It’s been going strong for a while, but in a short span of time everything falls through, and the asset is filing for a bankruptcy. You lose the entirety of your money. By putting smaller increments into various assets you allow yourself to have some wiggle room. In this case, if one or even a few assets go bankrupt, you won’t end up with a complete zero on your returns.
A diversified portfolio leads to fewer risks regarding ROI, make a note of it.
4) An investor always makes rational decisions.
On top of having a comprehensive plan, you need to pursue your goals with a clear head. You can’t make tough decisions on-the-fly.
There is no place for gambling and emotion. Calculate everything, and work on your plan.
It also should be noted, that there is no 100% guarantee you will get a full return on your investment. Sometimes, even bank deposits can vanish into thin air, so be ready for everything.
If somehow you ended up investing into a volatile, high-risk business; try to withdraw the initial investment as soon as possible. There is no need to get greedy.
Don’t pursue the same thing everyone else does.
If suddenly a bunch of investors begin to rush to an opportunity, don’t follow them. It is already too late. You need to be ahead of the curve, one step ahead. Make sure to observe what the crowd does, and don’t become emotionally invested.
5) Investors only risk money they are willing to lose
A loss of investment should not affect your general state of finance. In short, you shouldn’t take up investment as an activity if you don’t have enough money to sustain yourself and the business at the same time.
Will you become destitute if you were to lose your investment?
Will you have to take loans?
Will you have to cut a significant amount of personal expenses to counter your new financial situation?
Answers to those question should always be a resounding „no.“
So there you have it. Invest smart, invest safely.
Robert Everett: I am a freelance writer currently based in Chicago. Solving students career and university problems. Having interest in marketing and business.