More and more often, you hear financial experts say that your money has to work for you and that you will miss opportunities if you do not immediately ‘invest’. Also, you will frequently hear more successful investment stories than failure stories.
All of this makes many entrepreneurs and private individuals restless and bump into investments hurriedly and carelessly. Undoubtedly, the end of such a hurried investment decision is more likely going to be a loss. This is one of the don’ts of investing – Don’t invest because of the noise! Unfortunately, both new and old investors make this error.
There are do’s and don’ts you need to know before you venture into any investment. This is what this article is about. So, If you don’t want to kiss your hard-earned money goodbye, be patient enough to read till the end.
Do’s of Investing
Here are the top do’s of investing:
1. Divide your assets over portions
Before you get started with investing your money, you will first have to determine which capital you will use for this. The easiest way is to divide your assets into different portions. Here are a few examples:
- For Necessities
This portion is intended for expenses that you cannot postpone. Think of expenses for your children’s school fees, feeding, car repair, or replacement of a washing machine.
- For Luxuries
This portion is intended for expenses for a “big lifestyle”. Think, for example, of a vacation in Dubai, throwing a big birthday party, buying designer clothes, and the like.
- For Pension
This portion is even a form of investment in itself. It is a part of your income accrued over time during your working days for when you stop working.
Once you have divided your assets into segments, you can look at which money you can invest best. If necessary, engage a financial expert for this.
2. Set investment goals
Especially as a beginner investor, you need to set investment goals before starting. Your goal could be to buy your dream house in the nearest future, for starting a big business or new career, to leave an inheritance for your children, or plan for relocation.
Whatever investment goal you have will be your foundation for smooth investing. It will also make it easier for you to estimate the desired time to invest.
Choose investment goals according to your choice. And since it’s really what you want to achieve, you’ll be passionate about making it happen.
3. Study investment instruments
The next thing to do is to study the various types of investments available such as stock investments, P2P lending, mutual funds, gold, deposits, and others.
There’s nothing wrong with learning the basics first so that you get to know the investment and can finally choose the best one.
Knowledge is power: investigate what the basic concepts of investing are, be well informed about the risks and limitations of investment and, if you cannot understand so much information, consider the option of taking a course or hiring a financial advisor to analyze your situation, value your capital and guide you a little more in selecting the right products for your profile.
4. Choose investments according to your risk profile
You must also choose an investment instrument that is psychologically appropriate. This can be determined through the investment risk profile. The risk profile is divided into 3 types, namely aggressive, moderate, and conservative types.
Aggressive types are investors who are willing to take high risks because they are pursuing high profits. Moderate types are investors who take risks in the middle and the expected profit is moderate.
While the conservative type is an investor who tends to relax choosing low-risk investments and low returns. So, choose the investment based on your risk profile.
5. Choose a legal investment application
You have to choose an investment application that is licensed by the Financial Services Authority and other institutions. The application must be legal to protect you from investment problems such as unfair losses, fraud, and others.
Don’ts of Investing
Here are the top don’ts of investing:
1. Don’t invest money you can’t afford to part ways with
Here’s one of the foremost rules of investing. Even though it may be tempting; You don’t invest with what you can’t afford to lose. So do not invest with the money that you have allocated for necessary expenses.
Do you have other money that you do not need in the short term? Only invest with this money if you can postpone your spending on these things. With this, you’ll be able to adjust easily in case you lose all or part of your investment.
2. Don’t invest relying on debt
There’s already a level of risk involved in investing. Hence, when you depend on the money you owe to invest, that doubles your risk.
You have to distinguish between debt and income. Debt is an obligation that must be paid. When the investment is successful, the debt can be paid off.
However, what happens if the investment fails? You are not only sad because of the failed results, but also have to rack your brain to pay off debt.
3. Don’t invest because others do it too
What everyone is doing may not be the best for you: it is always better to do your research on the type of investment you are going to enter and make your decisions based on what you found out instead of jumping blindly due to the popularity of the moment.
Especially if it is a new form of investment, in these cases it is advisable to exercise caution, wait a while and see what happens before investing.
4. Don’t bet on one horse
You need to diversify to minimize losses. How to diversify is to deposit capital into more than one instrument that has a different way of working.
If one instrument loses, but one instrument gains, you still earn. You must ensure the return and risk of investment are balanced in the portfolio.
5. Don’t invest without controlling your emotions
Stable emotions are very necessary for investing. The decisions you make are influenced by your emotions at the time.
There are many incidents where investors cannot control their emotions, then rush into making decisions, and in the end make them even more losers.
6. Don’t stop learning
Learning to invest is not only before starting, even when you have entered you will get a lot of new insights about investing. Don’t deny this new knowledge, you can learn it to face the next risk.
In addition, stay informed: check the news, and specialized magazines and stay up to date on reliable social networks to know how the indicators of the investment are moving.
I hope that these few do’s and don’ts will prepare you for your investment journey. However, due to the volatility of some investments, it is important to be prepared for both success and failure and, of course, learning. All the best!