10 Rules of Investing.
1. Always Start with Index.
It is boring but it builds the fundamental basis of patience, non-gambling risk and perseverance.
Index funds is basically a collection of stocks consisting of major companies [INSTANT DIVERSIFICATION]. Reason for starting index funds first is because they are low cost, can be invested with low capital and lower volatility. Always invest in at least US$10,000 before venturing into stocks and shares. Beginner investors do not need emotional distractions from volatility stocks during their early days of investment.
2. Always do your own Research
Don’t listen to your pals or professional investor, it’s YOUR OWN MONEY. Make sure you take the information, research and make it your own before committing.
Remember, you are investing your hard earned money and make sure you make the final decision on WHY you are investing in company ‘X’. Make notes and keep them aside as a reminder why you have decided to buy the company in the first place.
3. Invest in Business you know
If you can’t explain the business to someone else don’t invest in it.
Everyone has their own strength and weakness. Make sure you invest in something you are comfortable and familiar with. If you venture into a new industry make sure you study and do your own research.
4. You own part of the company and business.
Yes, you do. You are investing in the future of the business.
When you commit to the company this is for a long term relationship. Enjoy the journey and reap the dividend rewards. Grow your wealth along with the business.
5. Save faster than you invest.
Don’t expect to invest in a lump sum and turn it into millions without further investment. A common error judgement by many early adopters. It requires regular funding to grow your wealth.
Shares goes up and down. Regular savings into investment pots is a key to your cash holdings when you buy on the dips.
6. Buy when everyone is fearful.
If you have done point 2,3,5, you can execute point 6 easily. Who pays more than the asking price? Buy on discount when everyone else is selling.
If a company share drops on no fundamental issues means the business is ongoing and will do well. Distractions such as scandals and media highlights which does not impact the balance sheet can simply be ignored.
7. Buy companies which you can sleep on.
Not literally of course. Don’t invest in companies which are so risky and keep you up at night.
Investments are meant to be passive form of income. If you get stress and worried with anxiety means you have taken far too much risk. There are thousands of public companies you can invest in and choose one with better probable returns
8. Long term is the key to success.
It takes time for your money to compound. There is always that threshold break-point in year 15–20 where it starts growing exponentially. You need growing dividend, yield and cash injection to shorten the time.
Long-term relationship is a prosperous journey. Gambling is only meant for short quick burst returns. Stocks and Shares investments are like our children. We watch their birth, nurture, educate and see them do well for their own future. If you want short term fun get a virtual pet.
9. Buy Good Quality Companies
If you are investing in a large sum of money int a company, why invest in the crap ones?
Its like walking down the shopping ailse and ay top dollars for reduce food!