The basic Investment Principles is to be calm and only calm. Therefore, the number one principle of an investor is to learn to manage your emotions.
Investing is good. And investments that bring a stable and high income are wonderful. But how to make sure that each investment is successful? Here are the basic investment principles that guarantee a good investment decision.
1Principle 1: Never Invest the Last
This rule can be called the commandment of the investor. Since there is always a risk of losses, it is necessary to invest only that part of the funds. So that the loss of which will not entail serious difficulties for the future life of the investor. For this reason, it is not worth mentioning that you can never invest borrowed money at all.
Investments should not be stochastic. Analyze your monthly income, decide what profit you want to receive from investments and invest only that part of the income that you planned. No more, no less.
2Principle 2: Diversify the Risks
The expression “you cannot put all your eggs in one basket” is the best suited for investing. To reduce the risk of loss of funds from investments in one specific asset, it is recommended to divide it between several unrelated ones. This will help to cover losses on one transaction at the expense of profit from the rest.
I am convinced that any investment is a risk, but the profitability is greater and this motivates to invest. Always think in detail how much you can lose and invest something that does not constitute a significant blow to the overall budget.
3Principle 3: Carry out a Balanced Analysis
Before investing in financial market instruments, it is necessary to carefully analyze their dynamics, the state of the issuer and market position. And then make your forecast about the future behavior of the asset. Only after that, you can decide on investing money.
4Principle 4: Observe Investment Discipline
One of the main rules of a good investor is to stick to your chosen strategy. Often the temptation to buy, or, conversely, sell an asset bypassing the original strategy, is great. But in most cases, the result of such off-system transactions are losses or loss of profit.
5Principle 5: Make Decisions Yourself
Despite the abundance of various analytics in the network from financial experts, the investor needs to understand that he alone is responsible for his investments. For this reason, of course, you need to pay attention to the advice of experienced market participants, however, the final decision on investments must be made based on your views.
6Principle 6: Control Emotions
The financial market is not the place to make impulsive decisions. Each investor action should be thought out and performed regardless of emotions and excitement.
7Principle 7: Return the Contribution
As soon as the total income from investments has reached the size of the initial deposit – withdraw it immediately, starting to work for net profit. Only in this way will you ensure 100% safety and profitability.
Another thing is if you make deposits regularly. Then withdraw at least 50% of the profit for each installment, adding the other half to the deposit. So the guarantee will, of course, not be 100%, but the risks will be significantly reduced.
8Principle 8: Long term investment
One of the key principles and rules of investment says: you need to distribute funds not only in different projects but also in projects with different terms of work. Thus, regular profits are established. You should try to invest evenly or according to the formula 40% -30% -30%.
9Principle 9: Diversification of Investment in Projects
Any investment is a risk, but to reduce it – spread the amount in several directions. Even if one fails, you can make a profit from the other. You should not play at maximum rates, start small, understand how to distribute funds correctly and then gradually increase the amount for work. Thus, you can establish a cash flow.
10Principle 10: Study the Company
The key principles of investing state that it is not enough just to know about the company. It also is important to understand: what are the results of its work. To do this, you can see such data on websites or in special registries. For example, the company’s capital is $ 50 million, bonds are issued for $ 30 million, thus, the profit is $ 20 million. And then you decide how much the indicator is suitable for you.