11.7 Basic tips on investment
Each of us has different investment goals and that plays a big role on how we invest. The following list explains what beginners should know before investing. Also, here are a few common mistakes investors tend to make:
- Never put all our eggs in one basket. You should always diversify. What works today may not work tomorrow and so try to have a well-balanced portfolio. Putting all your trust in one stock can lead to devastating results.
- You have to be very clear about the reason you are investing. It’s very important to set your objectives from the start and be very specific about your goals. What do you expect from your investment? Do you want to earn enough money to buy a house or a car? Do you have short-term or long-term goals?
- The ‘get rich quick’ mentality rarely pays off. Following a solid long-term policy may not make you a millionaire overnight, but it will give you steady profits.
- Use your own judgment. It is one thing to get professional advice but keep in mind that the final decision about any investment should be only yours.
- When the market drops some people succumb to fear and sell prematurely.
- Greed is also a problem, because you may end up buying stocks that aren’t worth their price.
- Many people get really excited at first, but give up when they meet any obstacle.
- Always make your investments for the long term and continue to do whatever it takes until your objectives are met.
- The following tips will further help those interested in investing in stocks
- Look at the value of the stock instead of the price.
- Low stocks may be low for a reason. Look at the whole picture. See why the price is low and is there a possibility it may rise and at what level.
- Check the companies’ return on net worth. This is the profit after taxes divided by the net worth. It is important to see a trend of growing return on net worth, but remember that this is not a sole indicator.
- Spread out your risk. You should not put all your money in high-risk stocks. Try some lower risks and some higher risks stocks. This is the best way to protect your money.
- Understand the basics of stock prices. Prices move up or down depending on future projections.
- Practice systematic investment plan in stocks also.