February 11

10 Basic Investment Rules


Investments can seem confusing and intimidating, but they don't have to be. Investing is a key to financial success.  If you don't invest to build a nest egg and accomplish financial goals, you'll have nothing to show for a lifetime of labor.  You don't want to invest your money just anywhere or just anyway; you need to be smart about what and how you invest so you can grow your wealth and become financially free.

To ensure you invest the right way, here are 10 investing rules you should consider and know by heart.

  • Invest Early and Often - Invest as early as possible and as much as you can. Compound interest works magic on your money. Turning small and steady investments into a big nest egg, that buys financial freedom.
  • Avoid Fees - There is a myth, or at least a misunderstanding, that investing need to be hard and complicated, or that you will do better with the more sophisticated investment that wealthy people have access to like Professional Financial Advisors. Unlike actively managed funds, which can charge a fee of 1 to 3 percent, some professional suggestions are to buy low-cost investments, such as index funds, which track different segments of the bond and stock markets.
  • Take Calculated Risk - While saving means putting aside money you don't spend, investing means buying assets that have the potential to provide a reasonable rate of return.  Minimize risk by having a diversified portfolio.
  • Balance & Rebalance - Regardless of your age, you need to ensure your portfolio is well balanced between large and small cap domestic stocks, foreign securities, and fixed-income investments. It is crucial to keep rebalancing to protect your earning from risk.
  • Don't Invest Money You'll Need Right Away - while investing is essential, you don't want to invest every spare dollar. You may need some liquid assets.
  • Don't Invest in Anything You Don't Understand - Taking calculated risks requires you to actually understand both the potential reward and the likelihood of loss. That means you need to know the investment will make you money, whether the asset has a history of providing promised returns, and how losses could happen.
  • Fear and Greed - Basic human emotion is perhaps the greatest enemy of successful investing.  But whether you are a long-term investor or a day trader, a disciplined approach to trading is key to profits. You must have a trading plan with every trade or investment.
  • The Big Picture - Understand your overall financial situation and how wise investment fit within it. Before you invest, examine your debt obligations, tax situation, ability to fund retirement accounts, and insurance coverage.
  • Investment Advisor - Before you hire investing help, first educate yourself so you can better evaluate the competence of those you may hire. Beware of conflicts of interest when you consider advisors to hire.
  • Staying Power - A quote from Warren Buffett. "If you aren't thinking about owning a stock for 10 years, don't even think about owning it for 10 minutes".

In Summary, doing nothing is costly. He who hesitates, loses money. When you neglect to invest, you are robbing yourself of the compound interest that even the smallest amount of money can accrue.


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