Simple Rules For Successful Investing
One must be able to clearly state his objective with clear time horizon and dollar requirements
, whether it may be for short term, medium term or for long term needs. The objectives must be prioritized based on their competing level. At the same time you must be able to lay a specific and realistic plan to make your objective happen. In short it can be said that it is very important to have a clear investment objective and a realistic plan to reach your objective.
Though it gives a good look it is not advisable to have all your assets in one particular investment type. You must broadly diversify your portfolio. You should not invest all your assets either in stocks, bonds, real estate or in cash. Even though you have a small portfolio it should be evenly distributed among several types of investment. This is very important to protect all your assets and also to minimize your risk.
The level of risk involved in the investing are quite different. Though there is a fall between the extremes it requires a careful analysis. On an average, in sufficient amount of time the increasing risk will produce increasing rewards with certain limits to the generalization. In the investment field if a race happens between a hare and a tortoise, it is the tortoise who wins the game at last. In all type of investment there is a optimal level of risk and this is the place where you will place your investment. In general it can be said that to assume more risk is very dangerous and to assume less risk is total waste.
For example if your are going to invest for less than 5 years then you should not invest in the stock market. Since may have to sell your investment the when the stock market is depressed. So it is better when you invest in market fund or in some other short term funds. You can easily win the game of investment if you are young enough and can invest small amount of money on a regular basis. Since the compounding power will be on your side. If you think that there is a secret for successful investing then this is it.
Carefully select your investment type and use no load mutual fund. At the same time you have to measure your performance on a risk adjusted basis. Since fund selection will also have a direct impact on your investment objective and level of risk tolerance. Do not prefer to buy any fund just simply because they are exciting, fashionable or they were the best till last year or last month. Always do your own research and take time to read the prospectus. This is what that leads your way to success. The important thing of all is to be more objective, have to carefully study the choices and never buy anything just because someone is trying to sell them to you.
It is a know fact that any business needs good management and your investment will act as your business. So allocate some time say at least monthly to manage your investment. This is because good portfolio needs discipline and patience. Always stick to your strategy choice. You may not be always right in your decision, so try to learn from your mistakes, you will even outcome the professionals.
by: Michael John
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