If you’re an active investor, it’s always smart to follow a few basic rules to insure that you don’t end up sinking your money into anything that won’t have a good return. With this in mind, here are a few tips for investors to help them reduce the risks associated with investing.
Number One: Don’t invest without having a plan. Like anything else, the more research and planning you put into your investing the better off you will be. The big thing here is to figure out just where it is you want to go with your investments, and what the end goal will be. Like trying to construct a house without a blueprint, investing without a picture of what you are trying to achieve will leave you with nothing but confusion and most likely ineffectual investments.
Are you planning for retirement or are you trying to pay for a college education for the kids? Maybe you are just trying to build-up your own net worth. No matter what the end goal is, there are specific investments one should consider that have been shown to work for each type of investment goal, and you should get to know what those are before laying down any money.
Another thing to consider when making your plan is how much risk are you willing to accept when it comes to your investments? There are many things that come into play when determining the amount of risk to take, not the least of which is your comfort level. What good is a high risk investment that could potentially make you big money if it keeps you awake at night?
Number Two: Don’t be fooled by early wins and get emotional or over confident. Adding emotions into any decisions making is never a good idea, and that goes double for financial investments. Always look at your investment opportunities with a critical, even doubtful eye, because investments made without doing your due diligence typically will lead to loses. Always look at the big picture that surrounds your investment, and run the numbers, twice, to make sure that you are making a wise choice.
Number Three: Just because one person makes money investing in cryptocurrencies or that doesn’t mean that you will. Don’t let some YouTuber, or television financial show convince you to invest your money in something you don’t fully understand, and always do your research to make sure that wherever your money goes that it fits into the end goals that you are trying to achieve with your investments.
Investment advice from family and friends is a common reason for investment mistakes as they have a lot of influence, and don’t usually need to prove their advice is good before it’s acted on. Once again, do your due diligence and insure all investments made by you is in line with your end goals, willingness to accept risk, and overall investment strategy.
Number Four: Always make sure to watch your investments closely, and never put them on “auto pilot,” or allow them to just run without knowing how they are performing. Too many times people put their money into a portfolio, and just expect that the investment will run itself. Making regular efforts to keep your portfolio balanced is also an important part of managing it smartly.
We aren’t talking about spending 10 hours a day keeping track of your investments and losing sleep over how well they are performing, but checking your portfolio at regular intervals is the only way that you will ensure that any downturns won’t come as a complete surprise. If you cannot watch your investments get someone else to watch them for you, especially if your implementing an option strategy.
Number Five: Add some patience. All good things come to those who wait, and this is usually true when it comes to investments. Shifting your investment money around a lot trying to chase down better returns never really gives your investments time to show their stuff.
Just because it might not be doing the best at the moment doesn’t mean that it will stay that way. Conversely, just because an investment is doing well doesn’t mean it will stay that way either. Make sure that you take the time to look at the long term history of the investment, and see what its overall performance has been. That can help you make a better decision about whether to keep it, or sell it.
Research is at the heart of all these investment tips. If you allow only factual information that can be proved to guide you through the shark infested waters of investing, you have a better chance of not getting eaten. Investing money can be fun, lucrative, and educational, but only if you take the time to study, learn, and make smart decisions based on your specific strategy, and specific end game.