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There is a myriad of ways in which your money can work for you. However, as investors we need to ensure that our money works both efficiently and effectively.
In order to succeed, your investments need to yield profits sustainably on the long-term. Forget get-rich-quick schemes and so-called investment “gurus” who claim to have the secret to success.
If they actually had it, they wouldn’t be selling it to you.
So, how do you actually invest for success? Let’s go through some of the basics:
Investing is all about playing the long game. You don’t have a crystal ball that tells you the future nor do you have access to inside information. If you actually did, you’d find yourself in serious trouble with the SEC and locked up for several years.
What you do actually have is patience and an end-goal. When investing your money, look to maximize your growth over a set period of time.
Raking in profits by speculating on either stock or foreign currencies is a sure way to get yourself burned within a few months. Instead, play the long-game and invest in solid, established businesses with a proven track record.
With the extreme uncertainty plaguing today’s markets, you’ll want to have your cash invested in something with good fundamentals.
Passive income is defined as being income derived from activities that do not require any active participation.
When investing, focus on assets that allow you to continually earn an income passively. From property rentals to dividend paying stocks, a passive income focused portfolio will enable your investments to literally pay for itself.
While the initial returns may not be particularly impressive, building up various income streams will eventually add up over time. Additionally, most passive income investments tend to be lower-risk investments that will not increase your risk exposure.
It’s always a good strategy to spread out your risk wherever possible. A well-diversified portfolio should consist of a good mix of blue-chip stocks, riskier investments and foreign currency.
This minimizes your risk exposure and reduces the likelihood of your entire portfolio getting wiped out in one fell swoop. When investing, always take the time to understand what it is that you are investing in exactly.
Some investors make the mistake of focusing too much on a particular industry or asset. While it may allow for larger returns, a sudden economic downturn can leave you with next to nothing.
For example, when President Trump made several high-profile announcements with regards to hydroxychloroquine, stock prices shot up which sent investors scrambling to snap up as much pharma stock as they could.
When studies disproved these claims, share prices plummeted which likely caused severe losses for investors who focused too heavily on these stocks.
Hence highlighting the need to keep your portfolio diversified.
When investing, it’s always best to remain cool, logical and detached at all times. Regularly conduct research into your investments and never get overexcited.
On more than one occasion, investors have allowed emotion to cloud their better judgement. That’s why people that bet on horses take into account the odds of trustworthy sources such as TwinSpires.com and don’t follow their instincts only.
This has resulted in them either going in too deep or pulling out before they could actually profit. Hence when making a decision, always ensure that you have solid data to back you up. Something which goes a long way towards preventing you from making a rash decision.
In fact, the great Warren Buffett has often reminded amateur investors of the folly of making emotional decisions i.e. following market trends and behaving irrationally.
Investing is a serious business that can make or break just about anyone. However, by keeping close to the fundamental, even the most inexperienced of investors can make it big.
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