10 Investment Strategies that can Never Fail
Are you newly employed? Or are you working since a few or many years but haven’t yet been successful in investing in something and all your income evaporates within a few days after the payday? Whatever is the case, any time is the right time to learn to invest. Here are some investing basics tips that are time-tested by industry experts and so, can never fail.
1. Analyze Your Requirements and Goals
You may be very busy, running for your job, striving for more and more money; but if you don’t have any idea about for what you are earning, what is the use of the efforts? Take some time and sit down to analyze your true requirements and goals. We all have heard since our childhood that earning a lot of money is good. It’s rare that anyone talks about what to do of so much of money. Having no idea of what to do of the money can lame your efforts. Once you start thinking on what you can do with the money you will get as the ROI, you will be motivated to make investments and make them correctly.
2. Decide Terms of Investment
Once you decide your requirements and goals, you will need to decide within what period you want to achieve your goals. You may have multiple goals and varied time frames for each of them. Of course, the amounts you want to invest will also vary. Let’s take some examples:
- You want to buy a house and want to save for its deposit. You hope to buy it within say 2 years. Here investments like stocks and mutual funds won’t be practical as their values are not stably growing. They may drop down drastically too. Here cash savings accounts such as Cash ISAs are useful.
- If you want to save for your retirement, you can take a 25 years’ time and here you should focus on the long term benefits of your investments. Investments except cash savings accounts are more likely to offer you better scope of overcoming inflation over a long term and achieve your pension goal successfully.
3. Make a Plan
Going systematically with a plan always pays! Investment is a money matter and you should be ultra-careful with it. In short, making a plan for investment is always recommended. Again sit down and make a plan. Writing your requirements down will create a clear picture of what you have and what you want to have.
As a rule of thumb, start with small investments like Cash ISAs. Next add medium ones like unit trusts if you have no problem with high volatility. Higher-risk investments are only recommendable after you build a good low- and medium-risk investment profile. After this too, you should take up high risk investments only if you can afford to lose the money you invest.
4. Keep the Investments Scattered
The basic rule of investment is to scatter them. This improves your chance for a better return. When you invest a bigger amount, your risk increases. But when you scatter the same big amount, the risk is minimized. This is known as diversification of investments. It smoothes out your investment portfolio and profile of returns.
5. Set a Time You Want to Devote
Do you consider yourself an expert in stocks? If you do, you can do all the investment on your own and in that case, you should set a time for this task. If you are going to purchase individual shares, make sure that you know the risk.
If you don’t have much of time or knowledge about investing in shares, you better invest in investment funds, like unit trust and investment companies. Here your money is pooled with that of many other investors and is used to purchase a widespread investment.
Or else, hire a professional or seek a financial advice and leave things to her/him to get free time for your other businesses.
6. Develop a Strategy and Follow it Strictly
Investing in stocks is not a rocket science. If you see five successful stock-investors, there would be five different strategies they should be applying. In short, to become successful in stock investing you should develop your own strategy which you can do with time and experience. During your apprenticeship, you will have to try many of them; but a time will come when you will find your own strategy. Once you find it you will have to follow it strictly. The investor who keeps jumping from one strategy to the other ends up in getting the worst returns.
7. Look at the Long Term Benefits
Investment is a lot like gambling and we invest looking at the long term results, hopefully expecting them as gains and not losses. In short, you need patience and should have an eye on the future rather than being eager to get returns.
8. Keep Your Mind Open
While big companies may have the potential to give you bigger returns, there are smaller companies too that have the same potential, and you cannot afford to ignore them; they may be the large blue-chip companies of the future. And if you study the past, you will find that small-caps have always been given better returns to their investors, while large-caps haven’t. This doesn’t mean that you should invest everything in the small cap companies. It only means that if you neglect the small caps altogether, you may lose some of the largest gains.
9. Don’t be Afraid of Taxes
Considering taxes above all other strategies could be dangerous since it can make you take wrong decisions. Considering taxes are important but they should not be considered primarily. Your primary consideration should be to grow your money and secure it. You can also try to minimize the money you have to spend for taxes and maximize the after-tax return. However there are a few rare situations where you have to consider taxes above everything else while making an investment decisions. But in other cases, you should focus firstly on things other than taxes.
10. Invest in Yourself
Last but not the least is a great tip from the great investment tycoon, Warren Buffett, and so, we should consider it as very important. Warren Buffett says, invest in your own abilities. Anything you can do to develop yourself is the greatest investment.
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