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Investment for Beginners: The Dos and Don’ts of Investing

| Entreprenuer, Finance, Investor Guide, Uncategorized | August 21, 2015

With money in your pocket and dreams of doubling, tripling or quadrupling whatever you have could be a dream that makes you walk around seeing only dollar signs everywhere you go. Reading stories about the likes of Warren Buffet, J. Paul Getty and others could heighten that state but here is a reality check; they have come a long way, you are just getting started. Investment is a game soaked in passion and obsession built on resilience, persistence and shrewdness. Amongst these three qualities, the vaguest of them – shrewdness; comes first. It would amaze you to learn how shrewd every successful investor has been to get to where they are today.

Without much ado, I give you the fundamental do’s and don’ts of investing and I hope this would be the beginning of knowledge as you venture into investing or seek to turn around your fortunes if you are in the business already.

THE DOs

Carry out sufficient research

How much research is enough? There is hardly enough research that can be done on any field except what you’re supposed to be researching on is your original creation and has never been attempted. In investing, every stock has a company behind it, so in your own best interest, research the company with whatever (legal) means you have; to make sure you are putting your hard earned money in the right place. The same goes for getting a financial advisor. Do your research thoroughly.

Diversify your investments

Have you heard or read a quote from Warren Buffet claiming those who diversify obviously do not know what they are doing? To a novice investor, diversification of investments mean a large portfolio of investments but actually it means investing in different sectors so you don’t have a whole lot in one single sector. Diversification helps investors to not be over-dependent on one sector.

Pay very close attention to the costs

To prevent a meltdown especially while having high hopes and excitement, you have to pay close attention to the cost associated with every possible investment before making a decision. Commissions, expense ratios and advisor fees, all bite into your into profit earnings and if not checked could take up a large fraction of your earnings.

Have a savings account

While this might come with minute interests, investments are for a long period of time (ideally for over 10 years) so you would need something to fall back on. This is where a savings account comes in handy. You might need to have separate accounts for different needs but the bottomline is; have a separate account.

THE DON’Ts

You must not be led by emotion

Investing should be done on ONE fact only; data. Emotions could be your bane; negative or positive. Negative emotions like fear could spell doom for an investor while positive emotions like love could be as fatal as fear. Keep both emotions at bay as you don’t need either in large doses. You only need the right data.

Do not wait

Simple. You can’t afford to give money up to procrastination.

Do not try to place the market on a stopwatch.

You can’t just time the market so don’t even try to. Any attempt to do so, would only amount to self-deceit.

Conclusion 

Armed with these nuggets of investing wisdom, you will go from being a speculator to a seasoned investor.

    

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