7 rules for a novice investor

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The most important investment tips

I am sure that many people at the word ‘investment’ think something like this: ‘Why do you need investment? “My savings are under my pillow and everything suits me.” At first glance, there is a rational grain, because with this method of storing your funds, the risk of losing them is minimal. But, in fact, if you chose this tactic, then immediately lost.

The fact is that any money that is in your hands instantly enters into an unequal race with inflation and begins to get cheaper (and given the instability of the national currencies of the countries of the former CIS, they are really getting cheaper right before our eyes). At the same time, the official inflation rate, which you are told on TV, can safely be multiplied by 2-3 times. I was always interested, do experts who calculate inflation rate go shopping at all?

Thus, having received the money, you can: spend it, save or invest (I include the purchase of assets in investing). And, if in the first case you exchange money for goods and other valuables necessary for a person to live, then in the second case, the money simply evaporates. And only the third way allows you to save or increase your savings.

Diversify

Diversification is the main rule of successful investment, which allows the investor to reduce their risks. According to this rule, it is necessary to use not one investment instrument, but several at once (and the more, the better).

That is, if, for example, you decide to invest a large amount in PAMM accounts, then this approach will be wrong. It is better to split this amount into parts and invest it in several different investment instruments, for example: PAMM accounts, HYIP projects, real estate, mutual funds.

Diversification should also be used within each individual instrument. For example, in the case of PAMM accounts, you need to distribute the deposit between different accounts, if possible choosing managers with varying degrees of aggressiveness and conservatism.

Understand where you are investing

People always want to do less and get more. This feature of the human nature and investing has not bypassed. Beginning investors want, without wasting time studying, invest and get a stable profit. I think this is one of the main reasons why investors do not make a profit and lose money.

If you do not take fortune into account, then the best investor will be an expert in the field that is the subject of investment. People who most successfully invest in real estate ate a dog on real estate. And those who invest in sites have eaten the same dog on sites.

Therefore, before you invest in some kind of investment tool, you need to thoroughly study it. The more knowledge and experience you get in this area, the higher will be the chance of a successful investment.

First withdraw the deposit body and only then you can reinvest

If your investments entail more or less serious risks, then you should stick to this strategy. And it consists in the fact that you need to withdraw the body of the deposit as quickly as possible, despite the temptation to immediately begin reinvestment.

This approach allows you to increase the profitability of the investment instrument, but, on the other hand, increases the risks of the investor. Therefore, it would be more rational to first “recapture” their costs. And when the amount of payments exceeds the initial contribution, you can proceed to reinvestment.

Reinvest wisely

After the deposit is “repulsed”, a different percentage of profit can be reinvested: from 1% to 100%. Personally, I think it’s best to stay at 50%. That is, you can take half of the profit for yourself, and invest the other half back into the project, increasing your deposit.

Do not invest borrowed capital

Novice investors often cannot correctly assess their risks, they are too confident in their success and therefore take very high risks. One of the most rash acts is investing ‘other people’s’ money. It can be a loan, a loan from friends, etc.

This should not be allowed, because in case of failure you will not only not receive a profit from investing, but you will also have to stay. Then where to get money for investment, if you can not borrow?

Learn to save, save and save, find additional sources of income, increase your professional value. In addition, many investment instruments have a low entry threshold. Therefore, beginners can practice small amounts.

Use your return on investment wisely

Profit from investing can be spent in different ways. Someone buys liabilities for it (car, smartphones, appliances, etc.), and someone buys assets (that makes profit or grows in price, for example, real estate) or invests in new investment instruments.

I would advise doing both. On the one hand, you need to make money work, on the other hand, if you do not spend money on yourself, then the motivation and the meaning of their earnings are lost.

Do not make decisions on emotions

A successful investor always makes decisions with a cold head. Various investment projects will try to rob you of your cold head, turning to emotions.

Do not rush to make a contribution, consider everything for a long time and carefully. If you are considering the prospect of investing a large amount, you can make a short time out for several days, get distracted, and then with fresh thoughts begin to consider this issue.

It is important to be able to turn off emotions and analyze all risks exclusively with the mind. And do not be too optimistic in your forecasts. Always consider the likelihood of a worse outcome.

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