Before getting started with investment, you need to know your personal worth, start saving. – Setting money aside from your means of income, then you have to find out your investment personality (If you are a low risk or high risk investor and the type of stocks you should be invested in, your savings objectives and other factors like when you want to use your savings). Take the test HERE. Now that you know your personality as an investor, then what? You start small.
How do I make this work? You may ask. Here are a couple of tips to help you become a better investor;
- If can’t handle the heat, stay away from the fire
Stocks are not for everyone. You can’t build a solid financial plan using only guaranteed, safe investments. This is why you need to take a personality test and understand your investment appetite. If you don’t understand the stock market or what a mutual fund is, probably best to avoid these investments altogether until you learn more. The internet is your friend and there are platforms you can learn and have insights about the stock market. If you do understand but get too nervous, then stay out of the market until you know more. Always have it at the back of your mind though that investment is a risk, it all depends what you can take.
- Read the Turtle and the Hare, The race is not for the swift
Your friend just doubled his money because he bought bitcoins at the right time and now he has a Mercedes Benz. Does that mean he was smart… or lucky? Investment is not by the fastest or oldest in the game. Slow and steady savings with a disciplined plan delivers results. This is much like the turtle, who steadily plods along. Bet on luck or skill and it may turn out okay, or you may get an unpleasant surprise. Knowledge is power, technology is the future. Once you wield this to your advantage, you can get a Benz too.
- Treat Your Money Like Soap
Gene Fama is a famed academic in the field of finance. His son once said, “Your money is like soap. The more you handle it, the less you have.” So true. Moving money entails transaction costs, sometimes tax consequences, and most often, you’re going to move it at the wrong time. How do I know this? Year after year, research shows that an average investor under performs the market, earning half of the returns they could have, all because of their poor timing abilities. To fair better than the average investor, when you move money, it needs to be part of a well-designed investment plan, not a last-minute reaction probably based on a rumor.
- Get Comfortable with Cash
If you feel like money sitting in cash or money market accounts is wasting away, think again. Cash and money market can be a great place to store money while you research, study and learn how to make smart decisions with it. It is safe, low risk and easy to reach. People with cash have the ability to take advantage of great investment opportunities when the real estate or stock markets go down or up, depending on what you are looking for. Those who were fully invested don’t have those same opportunities. Think about that…
- Read Books, Not Just Websites
The internet is a blessing and an amazing tool. The amount of information available is astonishing, and at times, overwhelming. However, to get the depth of knowledge on a topic, I think nothing beats a good book. Educated investors earn higher returns. Commit to learning first and you’ll become better at investing. As much as there are platforms available for learning, there are also books available for in-depth knowledge. An example of one is the Rich Dad, Poor Dad by Robert Kiyosaki, Think and Grow Rich by Napoleon Hill etc.
- Study Your Shopping Habits;
As irrelevant as it may seem our habits affect the way we trade or react to market trend. When was the last time you went to the mall, saw something you really wanted that was on sale at half price, and thought, “No, I have a gut feeling the price might go down more. I am not going to buy it now.” When stocks drop substantially in price that means your future financial goals are on sale. Better investing means acquiring the knowledge and discipline to recognize when things are on sale and buy low. When to buy, when to sell, when to hold.
- Know What You Own
A stock is not the same as a stock index fund. A bond fund is not the same as a stock fund. It is amazing how many people who own large-cap equity mutual funds react to an irrational fear that they can lose all of their money. Do they have any idea what they own? Do they really think all the 292 listed companies on the NSE are going to go out of business at once? There is a distinct difference between what I call a Level 5 Investment Risk, where you can lose all your money, and taking on a Level 4 Investment risk, where you can’t. This is another reason why before you start investment, you need to know your worth, your investment appetite/ personality and the level of risk on the fund you are investing in.
- Remember, They Do Not Know You
Who are “they?” All the people (including me) who offer advice and financial commentary to the public. We don’t know you or your situation. We are offering advice that is applicable to a broad population. Does it apply to you? I don’t know, and neither do “they.” Only you, and if you have one, your personal financial advisor can determine if the advice is applicable to your situation. What do I mean? Again you need to know yourself in investment to know which financial advice apply to you or works for you. It’s a weird risky world we live in especially when money is involved. Be careful, follow your instincts and don’t be greedy. Know your limits and stay positive, after all.. Rome wasn’t built in a day.
About The Writer
Benedicta Omoruyi is a professional security and investment officer(CIS), marketer and technical evangelist for InfoWARE Limited. She is a fierce writer, content creator, investment enthusiast and advocate, and an all round creative female.