5 Basic Investment rules to follow
By investing you take risks. After all, you do not know what the value of your investment will be in the future. Some basic principles increase the chance of a positive result in the longer term. However you invest, always keep the basic principles of investing in mind. Below are the 5 Basic Investment rules to follow :
5 Basic Investment rules to follow
This article contains a summary of the most important basic principles of investing. But watch out! Following this is perhaps the most difficult thing. It is mainly a matter of controlling yourself and that often goes badly for the investor.
Basic Rule 1: Spread investments
Don’t put all your eggs in one basket. By spreading across different asset classes or industries, for example, you prevent one setback from leading to major losses. How you spread also depends on your risk profile. If you outsource investing, this is the responsibility of the service provider.
Basic Rule 2: Minimize costs
All costs that are withheld will be charged to your return. Suppose you invest 25,000 dollars for twenty years. Then one percent less return with a neutral risk profile (at 6.25%) leads to almost 15,000 dollars less final capital. Commercial service providers usually do not help you minimize your costs. Be aware of this.
Basic Rule 3: Invest for the long-term
Research shows that the market is erratic in the short term and humans are unable to time these movements. However, over a longer period, investing turns out to be profitable, because the impact of market risk (economic movements) becomes smaller.
Basic Rule 4: Know what not to invest in
Impossibly high ‘guaranteed’ returns are accompanied by very high risks. Be aware of that. It is also not wise to impulsively accept (telephone) offers. And, derivatives are not for everyone.
Basic Rule 5: Only invest in what you understand
Investing is risk management. If you do not understand what you are investing in, you will not be able to correctly assess risks (such as market developments). This also applies to complicated investment products where it is not exactly clear what you are investing in, and where many (unfavorable) conditions are included in the small print.
Investing is an excellent way to grow your money over time. This ‘5 Basic Investment rules to follow’ article will be helpful to you. But how can you start investing? We will help you get started on this website. As a beginner, you will see that investing does not have to be difficult at all. Start investing now!
