You probably know that a regular savings account offers measly interest rates. While bank savings will surely keep your money safe, it won’t earn as much profit as when you invest it. There are many ways you can invest and grow your money.
The stock market is a popular investment that offers more lucrative returns but it comes with certain risks. Other asset classes like mutual funds, bonds, gold, and real estate offer more stable income but require patience due to its long-term nature. Still, there are investment products that offer short-term, high yields. They seem very enticing but tend to be very suspicious.
If you want a successful investment, you need to make investment a lifetime profession. Investing isn’t a one-off deal. It’s a continuous process that requires your lifelong commitment. So, if you want your money to yield profit, you should be ready for a long haul.
How to invest a constant part of your life? Here are some simple rules to help you invest successfully and avoid mistakes.
Cultivate a money mindset
Your attitudes and perspectives about money can have a tremendous impact on the way you handle your wealth and investment. For example, if you value money, you’ll live according to your means and keep expenses low. This is necessary for building a good foundation for your investment journey.
Cultivating a wealth mindset can help you focus on your financial and life goals. This Forbes post gives some amazing insights on how to think like the legendary investor Warren Buffett. When you believe that you can achieve financial freedom, you feel more encouraged to invest. And as you look forward to the future, this can have a positive impact on all other aspects of your life.
Invest small but often
As discussed above, investing is a long-term process. Start putting small amounts of money, frequently on your chosen investment. This should be an amount that you won’t need for a long time. This way, you won’t necessarily feel the impact at the same time your investment grows slowly. This also gives you higher potential profit later on as you can enter markets at an opportune time. For example, if you invest in the stock market, you’ll be able to buy cheap stocks and ride them once they go up. This will surely earn you profits.
Keep calm
If you’ve decided to make investment a lifetime profession, you need to stay level-headed at all times. According to investment consultants at GainWest, investment platform, investors must know how to hold their nerve.
Financial markets go through ups and downs, and such erratic movements can bring a rollercoaster of emotions. When markets plummet, newbie investors might panic and pull out their money resulting in losses. It’s also not uncommon to miss out on some opportunities due to fear, such as when you hold off investing in a stock that has been on the rock bottom. Long-term investors should always act based on reason and never on impulse. So, rather than reacting to erratic market movements, try to maintain your peace and focus on your goal. Emotion-driven decisions can cost you money.
Take risks
This might seem contrary to the previous tip but if you want to succeed in investing, you need to take some risks. After all, your decision to invest in your lifetime profession is a huge risk in itself. When we talk of risks, these have to be calculated risks. This means that you have carefully studied the potential and future of a prospective investment. Don’t put your money on high-risk money-making schemes.
Part of stepping out of your comfort zone is by investing in unpopular but good investments. Usually, great companies are the top picks of many investors. However, some smaller companies and investments have a very promising future. These small-cap stocks tend to have better returns than more established stocks. However, this does not mean you should put your entire money on these less famous investments or stocks. You have to carefully study each to see how they will fare in the future.
Diversify
To mitigate the risks associated with your investments, you should put your money in various investment instruments. Don’t just put your wealth in the stock market. Diversify by investing in mutual funds and bonds, or even cryptocurrencies. Consider other markets in different geographic areas, particularly emerging markets. You can also add real estate, gold, hedge funds, and commodity funds in your wealth basket. When you invest a lifetime profession, you need to set up safety nets to protect you in case a particular sector collapses.
Finally, if your goal is to invest a lifelong profession, you have to give your plan some space. Long-term investments grow for over years (even decades). It requires patience before you can see the results of your investment.