10 Golden Rules of Investing

investment rules
Financial education Investing can often be broken down into a few simple rules that investors can follow to be successful

December 29 – Hispanic Solutions Group

Investing can often be broken down into a few simple rules that investors can follow to be successful. But success can depend so much on what to do, how, and what not to do. On top of that, our emotions get in the way of the whole process, although everyone knows that you need to buy low and sell high, our temperament often leads us to sell low and buy high. Therefore, it is key to develop a set of golden rules that will guide you through difficult times. Anyone can make money when the market is going up. But when the market stirs, the investors who succeed and prosper are those with a long-term plan that works. Here are ten investment golden rules that you need to follow to make you a more successful, hopefully wealthy investor and they are as follows:

1.Never lose money

Let’s start with some timeless advice from legendary investor Warren Buffett, who said: “Rule number one is never lose money. Rule number 2 is to never forget rule number 1 ”. Oracle of Omaha’s advice emphasizes the importance of avoiding portfolio losses. When you have more money in your wallet, you can earn more money from it. Therefore, a loss hurts your future purchasing power. Of course, it’s easy to say that you don’t lose money. What Warren Buffett’s rule essentially means is that you don’t be charmed by the potential returns on an investment, but also look for its downsides. If you are not making enough profit for the risks you are taking, the investment may not be worth it. That is one of the reasons many investors are avoiding long-term bonds now. Focus on the negatives first, advises Buffett.

2.Think like an owner

“Be mindful of your motivation when investing,” says Christopher Mizer, CEO of Vivaris Capital in La Jolla, California. “Are you investing or gambling? Investing involves an analysis of the fundamentals, valuation and an opinion on how the company will perform in the future. “Make sure the management team is strong and aligned with shareholder interests, and that the company is in a strong financial and competitive position,” says Graff.

Says Chris Graff, Co-Chief Investment Officer at RMB Capital. Remember that you are investing in companies, not just stocks. While many investors treat stocks as gambling, real companies back those stocks. Stocks are a fractional ownership interest in a business, and as the business performs well or poorly over time, the stock in the business is likely to follow the direction of its profitability.

3.Stick to your process

“The best investors develop a process that is consistent and successful throughout many market cycles”,Says Sam Hendel, President of Easterly Investment Partners; Don’t deviate from the tried and true, even if there are short-term challenges that make you doubt yourself.One of the best strategies for investors: A buy-and-hold approach to long term. You can buy stock funds regularly in a 401 (k) for example, and then hold them for decades. But it can be easy when the market becomes volatile to deviate from your plan because you are temporarily losing money. Do not do it.

4.Shop when everyone is afraid

When the market is down, investors often sell or simply stop paying attention to it. But that’s when the bargains come out in droves. It’s true: the stock market is the only market where goods go on sale and everyone is too afraid to buy. As Buffett said: “Be afraid when others are greedy and greedy when others are afraid” The good news if you are a 401 (k) investor is that once you set up your account you don’t have to do anything else to keep buying. This structure keeps your emotions out of the game.

5.Maintain your investment discipline

It is important that investors continue to save over time, in tough and good climates, even if they can only save a little. If you continue to invest regularly, you will get in the habit of living below your means even as you build up a nest of assets in your portfolio over time. The 401 (k) is an ideal vehicle for this discipline, because it takes money from your paycheck automatically without you having to decide to do so.

6.Stay diversified

Keeping your portfolio diversified is important to reduce risk, having your portfolio in just one or two stocks is not safe, no matter how well they have performed for you. That’s why experts advise spreading your investments into a diversified portfolio. If you had to choose one strategy to consider when investing, it would be diversification, says Mindy Yu, former chief investment officer at Stash. “Diversification can help you better cope with ups and downs. of the stock market ”. The good news: diversification can be easy to do. An investment in a Standard Poor’s 500 Index fund, which has hundreds of investments in major US companies, provides immediate diversification for a portfolio. If you want to diversify more,

7.Avoid syncing the market

Experts routinely advise clients to avoid trying to time the market, that is, trying to buy or sell at the right time, as popularized on television and in movies. Rather, they routinely reference the saying: Time to market is more important than time to market. The idea here is that you need to stay invested to get strong returns and avoid getting in and out of the market. And that’s what Veronica Willis, investment strategy analyst at Wells Fargo Investment Institute recommends: “The best and worst days are usually close together and occur when markets are at their most volatile, during a bear market or economic recession. . An investor would need expert precision to be in the market one day, exit the market the next day and re-enter the next day. Experts generally advise shopping regularly to take advantage of dollar cost averaging.

8.Understand everything you invest in:

“Do not invest in a product that you do not understand and make sure the risks have been clearly disclosed to you before investing”says Chris Rawley, founder and CEO of Harvest Returns, a fintech marketplace for investing in agriculture. Regardless of what you are investing in, you need to understand how it works. If you are buying a stock, you need to know why it makes sense to do so and when the stock is likely to make a profit. If you are buying a fund, you want to understand its history and costs, among other things. If you are buying an annuity, it is vital to understand how the annuity works and what your rights are.

9.Review your investment plan regularly

While it may be a good idea to establish a solid investment plan and then just play around with it, it is advisable to review your plan regularly to see if it still fits your needs. You can do this as long as you review your accounts for tax purposes. “Remember, though, that your first financial plan won’t be your last,” says Kevin Driscoll, vice president of advisory services for Navy Federal Financial Group in the Pensacola area. You can take a look at your plan and should review it at least once. once a year, especially when you reach milestones like starting a family, moving, or changing jobs.

10.Stay in the game

Having an emergency fund It is absolutely vital that you have an emergency fund, not only to help you through difficult times, but also so that you can stay invested for the long term. “Keep 5 percent of your assets in cash, because challenges happen in life,” says Craig Kirsner, president of retirement planning services at Stuart Estate Planning Wealth Advisors in Pompano Beach, Florida. Add: It makes sense to have at least six months of spending in your savings account. If you must sell some of your investments during a difficult time, it is often when they are low. An emergency fund can help you stay in the investing game longer. The money that you may need in the short term (less than three years) must remain in cash, ideally in an online savings account or perhaps on a CD. Compare prices to get the best deal.

Ultimately, investing well is as much about doing the right things as it is about avoiding the wrong ones. And in the midst of all that, it’s important to control your temper so that you can motivate yourself to do the right things, even when they’re feeling risky or unsafe. And remember that:

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