Investing is perhaps one of the most important words in the
lexicon of the wealthy. This is because investing represents the process or
activities whereby the rich deploy their financial resources to produces
significant returns for them. Their resources are gainfully engaged-in many
diverse productive ventures that amass wealth in the long run.
I have discovered that everyone wants to invest some portion
of their resources productively; they just do not know how to. I meet people
who tell me that they have some funds kept aside, or they can access a loan
facility but they do not know what to do with it. They seem to be more on the
lookout for whom to entrust with the responsibility of making their money grow
while they relax. You cannot grow wealthy by leaving all your investment
decisions to others to make for you. It is in your best interest to have a firm
grasp on investing; it is your capital after all.
The basic guide to investing comprises of the following
rules:
Do not invest in a venture or an opportunity that you do not
understand. This is one of the surest ways to lose money. If it sounds too good
to be true it probably is. Do your homework thoroughly and consult the experts
before you invest. The experts may not always be right, but the best thing
about being knowledgeable is that you are entering into an investment with your
eyes open.
Investing is for the long term. There is no such thing as
get rich quick. Investing your money is like planting a seed. The seed needs
time to be nurtured and grows before it produces fruit. You cannot just plant
today and reap tomorrow. You would be well advised to expunge the idea of getting
rich quick from your investment strategy mindset.
Don’t put all your money eggs into one investment basket.
You must diversify, spreading your risks. There are many investment vehicles
you can choose from to achieve your financial goal and you must know the pros
and cons of investing in each of them. The choice of vehicle will again depend
on your investment goals. Mutual funds, Stocks & Shares, Fixed Deposit
Accounts, Treasury Bills, Bonds and Certificates of Deposit are all investment
vehicles that can yield wealth. The choice is yours to determine which
combination suits you.
Discipline is extremely necessary so that you do not spend
the gains of your investment once they start trickling in. It is not advisable
to put all your monthly earnings into investments, just a portion which most
times is around ten to twenty percent. On no account must you spend from the
funds earmarked for this purpose, you are to live on the eighty percent left.
You cannot create wealth without keeping some funds aside monthly for
investments.
It is also extremely important to understand that most
investments go through cycles of upturns and downturns. There will be seasons
when it is extremely profitable and then there will be seasons when it will not
be so. This is precisely the reason why no one can guarantee an investment to
succeed completely. The economy could be going through a slump and the value of
your investment may decline. The good news is if you understood your choice of investment
vehicle quite well you can always position yourself to invest during downturn
periods when values may be low and cash out during upturns when values have
significantly increased.
You need to ensure that you are in agreement with the time
frame it would take to liquidate your investment and convert it into cash. If,
for example you invest your next house rent into mutual funds it makes no sense
to invest in a fund that takes 3 months before you can liquidate it. You don’t
want to be restricted from access to your funds when you need it critically.
Finally be guided by the richest and most successful
investor in the world, Warren Buffet’s two most important rules for investing.
The first rule is to never lose money while the second rule is to never forget
Rule 1. Start from where you are with what you have, apply the basics and in no time you will become a savvy investor!
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