7 Timeless Investing Tips
Knowing your personal finance and managing your finances in an intelligent way is crucial for a secure future. Most financial experts are of the uniform opinion that investing your money whilst you are still young is the promising route to financial freedom.
However, when most people start to invest, they make erroneous decisions that lead them to face significant losses. Knowing how to invest, the dos of investment, and where to put your money given your personal proclivities is essential in order to become a smart and profitable investor.
Here are 7 timeless investing tips for young entrepreneurs and investors to take with them on their journey to financial freedom.
1. Personal Budgeting
It is important to know what your monthly expenses are, eg grocery, maintenance, conveyance etc. When you know what your expenses are, you will be able to cut back on them and utilise that amount either as additional investment or put it in cash pool.
Personal Budgeting will help you realise and maintain your net worth, and is the first step a learned man takes when starting their investment career.
You can either make a dashboard of your net worth on excel, or you can you use Personal Capital, an online tool for budgeting and investment portfolio tracking. It is free and New York Times endorsed.
2. Emergency Pool
Profitable as it foreseeably is to invest most of your earnings, it is very important to plan for the rainy day. The hour of dire need can come knocking any day of the month and to be prepared for it is essential for your growth and well-being.
The phrase ‘Cash is Key’ implies having enough cash on your to help you through your rainy day. If you were to invest in a business, the cash should be enough to last you about 3 months in case your business didn’t make you any in the starters.
Whenever you start to invest in anything new, it is important that you understand the rules of the game and ensure backup. It is no secret that things take their time to work out for anyone who is starting to invest, best have your finances ensured as you focus your energies on your business.
3. Mastering Risk Assessment
Never put all your eggs in one basket, in fact, never put all your eggs at once anywhere. Risk assessment is extremely important when investing and being meticulous never goes out of fashion.
If you are a beginner investor, always keep your investment portfolio low risk. Invest with well-done research and analysis, always take expert opinions on the subject, and stick to low-risk investments for the first couple of years.
If you are an intermediate-level investor with experience in a particular niche, switching your niche and exploring other horizons may be a good idea but how you cope with the idea is what will determine your net worth and the strength of your portfolio. When switching industries whilst investing, stick to low-risk. There is nothing cowardly about it and everything smart. Remember there is a think line between courage and recklessness, make the link established with your risk assessment.
4. Read and read a lot
Growing up, we have all heard President Truman’s philosophy of readers are leaders. In the world of investment, the trick of the trade is information. Being informed is what determines your worth and knowledge is what gives you power.
Almost all successful investors like Warren Buffet have, at some point, told that reading is a part of their daily routine.
Reading up on financial news, real estate news, and industry-pertinent news about where you want to invest will keep you informed about every minor event or hiccup that could affect your finances.
Read up on everything financial and read up on the industry that you want invest in. It is extremely important to invest only in business that you understand.
5. Diversification
We have already established the importance of risk assessment, and diversification of assets almost always assures safety of ROI.
If you are investing in cryptocurrency, stocks, or any financial market, make sure you don’t test the depth of water with both feet. Invest invstocks of different companies, invest in different crypto coins, invest in real estate in different parts of the state. This will keep your money guaranteed if one market crashes, or if one industry faces havoc. Having different avenues ensures a safe exit and allows you to recover the loss.
6. Understanding Hidden Charges
When investing in stocks, the investment fees can kill you and it can cost you six figures. A meagre 1% to 2% return might not seem that high in the beginning, but when it accumulates over 20 to 30 years, the fee tends to spike high.
Some investment accounts also have management fees or trading fees (for trading accounts). These charges should be well under 1% and ideally around 0.15 to 0.25% in order for you to be able to enjoy the earnings.
You can use online tools and resources to understand hidden charges.
7. Invest in the Future
Generally, what might sound crazy to you in the present will have the most potential in the longer run. In and around the time that Ali Baba was founded, e-commerce was an idea frowned upon by some people and laughed at by the other.
However, today, they are the biggest fish in the ocean and whoever invested initially in Ali Baba made a fortune.
Today, NFTs, cryptocurrency, and blockchain tech are generally criticized but a decade or two from today, they will be the norm and the rest would be history. It is important to understand the direction technology and the world are moving towards and react accordingly.
However, a lot of it will be just noise and it is important to segregate that noise from the music.
All in all…
Investing is about being there for your future self. Understand what works for you. Invest what you can and invest in what you understand. The key is to be prepared and humble. Be smart, careful, meticulous, and thorough. But most importantly, be brave.
Here’s a list of books that has helped me with investing:
The Intelligent Investor: https://amzn.to/3J278Wn
The Richest Man In Babylon: https://amzn.to/3HooFrD
DISCLAIMER: Nothing in this article is to constitute financial advice, it is only for entertainment purposes. Always do your own research no matter what you read and where you do read it.
