It’s everyone desire to save some amount of money in places that can provide good returns. An intelligent investment has the reputation of being successful. Money management is a skill and is not a simple process. There are a number of considerations in the process that must be paid along with open-ended risks. You need to plan to make your money grow whether you are saving for education of your children, house, car etc.
Here are the rules to follow:
- Don’t follow trends, anticipate them – You should not follow herd. It is easy to lean towards the trends as we are easily influenced by public opinion. Going with the crowd never yield good results. Noise trading is a pitfall many traders fall for. They often get confused by the false signals sent out by the overall market trend and trading pattern. Traders should do due diligence. You don’t need to be one among the crowd, but stay a head of it.
- An unemotional discipline pays off – The ability to manage fear and risk determines the success for the investment. There is no short cuts in the market for successful investment. Avoid impulse buying. You cannot afford to be an optimist or pessimist with the numbers involved here, you need be realist, who analyses and evaluates the facts and figures and then arrives at an objective view. He is ready to account for the possibility of things turning wrong and accepts his mistakes. Yes, it’s tough to be a realist. Don’t allow emotions to drive your investment decisions.
- Investors, don’t listen to financial media – Before the news hits the mainstream, it has already been heard by thousands other investors out there and has lost the edge there itself. Don’t let the media and trends nurture your bad investing habits.
- Spend less than you earn –If you plan to build wealth, all you need to do is spend less than what you earn.
- Know where your money goes – Keeping a track of your spending is important for investments, this is the best way to stay true to your goals and budget.
- Identify your risk tolerance level – It is important to understand that any investment involves some degree of risk, however these risks are calculated in relation to potential payout. You need to know your risk tolerance limit, strength and weakness, since the act of investing is an emotional one for any new beginner. Don’t think only of the returns but also consider losing all your money.
Also read: Key Principles to investing in a stock