Wafaa, I’m just trying to get all this stuff figured out,” my friend Sara told me. She’s just starting out in investing.
“I’m paralyzed,” she said. “I don’t know what to do. I’m reading everything… But I’m not actually doing anything with my money.”
“Sara, you’re doing the right thing,” I said. “Learning first – and not doing anything stupid with your money – is exactly the right thing to do.”
Sara is not alone…
I’m sure many of you in a similar situation.
So, I’m going to cover some of the important basics of successful investing.
These are helpful for both beginning and seasoned investors… They’re a great reminder about the most important things to understand when it comes to the market.
1. You aren’t going to get rich overnight through investing.
A proper investment is one that has at least a five-year horizon.
Said another way…
Any investment that can double your money in a month is likely risky.
You could lose all your money just as quickly.
If you don’t adjust your thinking in line with this, chances are you’ll end up losing a lot of money.
Ignore what’s happening right now.
The market moves today are not relevant to your long-term goals.
People who want the daily excitement of winning or losing end up gambling and that’s a sure way to lose money.
2. Don’t invest in something you don’t understand.
One of the fastest ways to lose money is to put your funds into something you don’t really understand.
It’s easy to get dazzled by promises of big profits.
It’s even easier to get sucked in when the promises are accompanied by slick brochures and fast talk with a lot of words that you don’t understand.
If you don’t understand how you’ll make money on the investment, and you can’t point out your risks, you are not ready for that investment.
3. Don’t put all your eggs in one basket.
Don’t put your entire net worth in one property.
And make sure you spread your stock holdings around as well by first investing in funds that hold a bunch of stocks.
4. History repeats – or at least it rhymes.
It’s amazing how investors never learn that history repeats. The 2007-2008 bust in property prices is a good example.
In 2006, people thought property prices could never go down.
Two years later, people thought property prices can never go up.
5. Nobody will care more about your finances than you.
This is critical for you to embrace, immediately.
Nobody is going to care more about your finances than you.
You can’t just find somebody smart and hand your money responsibilities off to them.
You can’t just hand off your life and hope it goes OK – this is your life we’re talking about!
The quicker you take ultimate responsibility for your money, the quicker you will start building your fortune.
And you can’t ever give up that responsibility.
It is all right to work with smart people, and to delegate some of your money responsibilities to carefully chosen people. The important part is, you just can’t “check out.” You have to be the team captain here, the captain of your money.