Trading and investing into the financial markets has never been more popular. More and more people are starting to see the benefits of taking a little time to, first invest in themselves through a trading and investing education, but also using that knowledge on the financial markets.
Whilst traders may take quicker positions and investor will most likely be holding positions for much longer, perhaps months or even years. So, if you fancy investing into the financial markets successfully, and profit from companies you already know about like Google, Facebook or Microsoft, then these are the ten essential things that an investor must do and know before they start. Let's take a look...
1. What are your goals?
It sounds simple but many people start investing into a trillion dollar market without any type of plan which, let's face it, is essentially a gamble. Whilst it can be very simple to invest profitably for the long-term you must define your goals as this will align your expectations correctly, so you don't kick yourself in the teeth if you don't hit a million dollars in one day. For example, knowing whether you are investing for the next five or twenty-five years can make a huge difference to how you decide to invest.
2. Start early for compound interest
The single biggest reason to the success of most billionaires is the power of 'compound interest'. Even Albert Einstein regarded this as the 'eighth wonder of the world'. It basically means that your money makes you money as all the gains you make you put back into an investment so it compounds and builds over time. Sounds good right? It definitely is! The earlier you start the better but no matter how old you are it's never too late to start but imperative that you do actually start!
3. Every little helps
No matter how little or how big you can invest, it is well worthwhile investing on a regular basis. It sounds so simple but most people don't see the point in investing just $10 per month. However, if you look to the future by the time you're very old that amounts to a lot especially if you parked it into some good investments over the years. Of course, most people have a 'spend today and save tomorrow' mentality and that's the trap folks. Save and invest regularly to reap the rewards in the long run - you'll be glad you did.
It's imperative to spread your capital across a wide range of investments to reduce your risk and increase potential returns over the long-term. Whilst some investments are doing poorly some others may be doing great, thereby balancing it out. However, if you're fully invested into just one thing then it's either 100% right or wrong. There are thousands of markets across currencies, stocks, commodities and indices so the opportunity is there.
5. Educate yourself
By far the most important tip. You must educate yourself and learn your craft. After all if you're investing your hard-earned capital it makes sense to do your homework. Even if you read all the articles here and watched all the videos you'll be doing far better than the majority of investing wannabes who simply give away their money to the markets.
6. Have practical expectations
Of course, we all want that million dollar investment and for many it will come at some point. But you can't plan for that, if it happens great if not then you still need a plan to survive and to reach your goals as discussed in the first tip. Remember it's the journey that's the most beautiful part and what you do on a daily basis that makes the difference.
7. But don't limit yourself
It's important one must remain conservative in deciding which investment to take. However, that shouldn't limit you to just what you know. Be creative and find opportunities no matter how uncomfortable they may be. After all if it was that comfortable everyone would be doing it. Be adventurous in finding opportunities but be conservative in deciding which ones to take.
8. Manage your risk
Successful investing is all about managing risk. If you have $1,000 to invest then there's no point in putting all of that on just one investment. You're basically saying it has a 100% success rate... which of course is highly unlikely. If you follow the steps above, like making sure you diversify, then you'll be on the right path.
9. Review constantly
A very simple step to achieving more from what you are already doing is to review your investments constantly. However, this does not mean to look at your profit and loss of a five-year investment every single day - you'll never make it to the fifth year as markets move up and down. But it's important to review what investments have worked and have not worked. Concentrate on doing more of the stuff that has worked and find out where you're going wrong with the stuff that hasn't.
10. Have fun!
Sounds simple but most people forget that are best work comes from when we enjoy the process. Whilst investing is a serious process you are allowed to enjoy it too. In fact the buzz of finding an opportunity, researching it, investing into it and then seeing the result is exciting in itself.
There you have it ten essential tips for successful investing.