For many of the personal investors out there, does it sometimes feel like you are travelling in a dark, winding tunnel or have lost your way? Honestly, I face that at times too. The feeling of losing your purpose is not a good one. However, there are some fundamentals that I have instilled in me, to serve as the safety net or base.
1. Create your personal investment plan. Smart investment has a clear purpose or goal. Do not invest in stocks that does not fit in the plan.
2. Only invest in investment instruments whose risk do not keep you up at night, no matter how high a return they may provide.
3. Start small. Don’t put your entire life savings into your investment account. Once you feel comfortable and confident with a smaller sum, you may decide to add more money later.
4. Buying and selling stocks aren’t free. You pay commissions and transfer fees should you switch brokerages. Add these expenses to the amount you pay for a stock when determining your cost basis. If you do a lot of buying and selling, these costs add up as well.
5. Diversify by investing in different sector investment options that do not correlate. Should one sector perform badly, good performance in another sector compensates for it.
6. One common mistake by investors is to go for investment whose prices are heading up and pull out when prices go down.
7. When equities market perform badly, investors take flight to alternate safe haven to put their money, for instance bonds.
8. Understand average market returns. When you understand the movements and fluctuations in the market return, you will be confident to keep going when markets are down.
9. Everyone has 24 hours of time in a day. How you maximise your time or make life fulfilling is dependent on what you do with it. By having a planned schedule, you could give it all and know that the money will come by later.
Do you see the light at the end of the tunnel now?