When it comes to stock market investments and any allocation of assets, for that matter, following some of the basic and fundamental principles is absolutely invaluable. Every investor needs to have good investment management, financial discipline and knowledge-backed strategy to follow in order to achieve substantial long-term yields.
However, in an attempt to chase huge performance, overnight success and the urge to find “the next big thing”, a lot of investors are forgetting some of the golden rules.
The very first thing that young investors have to overcome is the fear of volatility. The markets are volatile. However, what you ought to understand is that volatility is a short-term concern and it provides opportunities.
The proper play here is to have your target set for the long-term. When you are investing for a prolonged time horizon, volatility is nothing to be concerned with. Inflation, on the other hand, is. This is your main issue as the value of money over time clearly depreciates.
The urge to buy low-priced stocks hoping that it will explode is huge. However, this is also the main reason for tremendous losses.
Penny stock are intrinsically risky and likely to be one of the riskiest investment you ever make, should you ever indulge in them. Comparatively, companies with a much higher stock price are likely to be on a more credible exchange with stringent regulations imposed on them making them a safer investment.
Whether you want to start saving for your retirement or for the college fund of your future children, you need to have a clear strategy in mind.
You need to make sure you are on course at every given moment to guarantee that everything is handled as per the highest standards. Do not deviate and always keep your end game in mind.
While you need to have your strategy outlined, you should always keep an open mind. While a lot of great companies are household names, this doesn’t mean that a lot of the good investments are the same.
There are thousands of smaller companies which have great potential. Always keep an eye out and capture opportunities when they present themselves and don’t be afraid of ‘boring’ companies, they can be extremely profitable.
Every time you are making an investment, you should be perfectly aware of the reasons for it. Do your own research, conduct your own analysis and make the decision only after you have gathered the necessary information.
These are the only basics of investments. These are some of our golden rules which will surely help you build a solid portfolio and will enable you to start investing towards a more prosperous future.
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