Without waiting anymore, let’s get straight to the golden rules of success!
Rule 1: Start Early
I can’t stress enough the importance of starting early. The more time you remain invested in the market, the stronger will be the power of compounding.
“The best time to invest your money was yesterday; the second-best time is NOW.”
Rule 2: Never try to time the market
There is never a right time to invest. If you believe in a company and its growth potential, you must invest irrespective of its current price. A gem will always shine and rise in the long term, no matter what.
Some people may get lucky one or two times, but no one can time the market successfully regularly.
While waiting for the “right” time, investors end up missing excellent opportunities to make truck-loads of money.
Rule 3: Diversify your portfolio
A famous quote in the financial investments world says, “Never put all your eggs in one basket.”
Diversification is one of the most effective methods of minimizing your risk.
If a major portion of your portfolio is invested in a single asset/stock, then you are surely walking a path of fire. You will potentially lose all your money in case that particular stock crashes.
Hence, it is important to diversify your portfolio across various asset classes- Equity, Debt, Gold, etc.
It would help if you diversified on the asset level as well. For example, you can own companies from different sectors such as banking, infrastructure, IT, chemicals, etc.
If you want me to cover diversification in detail, do let me know in the comments, and I will be more than happy to do so 🙂
Rule 4: Invest your money in smaller chunks over an extended period
If you have $1000 to invest, don’t just invest them at once. Since you never know whether the market will go up or down from the current levels, it is advisable to divide your money into smaller chunks and invest them over different time intervals. In our example, you can invest $250 each month over four months.
Following this rule reduces your risk to a great extent. And it’s better to earn a bit less rather than losing your capital.
Rule 5: Don’t invest based on Past performances
“Past performances are not indicative of future growth.”
For example, if a stock has given good returns in the past, it must have done some great business in the previous years. However, suppose the company faces a financial crisis due to poor management of cash flow, then it’s obvious you should not invest in that company’s stock just because it gave tremendous returns in the past.
Thus, investors should do good research before buying a particular stock.
Rule 6: Discipline over emotions
Any investment comes with some risk, and don’t let the volatility of markets scare you. If you panic-sell or buy out of FOMO, then you should not even invest in the first place.
Keeping your emotions aside, it is worth understanding that risk and returns go hand-in-hand.
Be disciplined and follow the processes- invest in quality assets and stocks, keep your portfolio diversified and be consistent.
Rule 7: Keep a tab on your portfolio
As an informed investor, you should regularly monitor your investments. The markets are extremely volatile, and hence the value of your investments will also keep on changing. Therefore, you should always be aware of how your investments perform and make necessary changes in your strategy as time passes.
You cannot follow the same strategy throughout your lifetime. Thus, keep reinventing your strategies and asset allocations to keep your portfolio in good shape.
Lastly, never be shy of taking help from experts. Their advice will only do you good in the long term
This is a guest post written by Keshav Bansal, catch him on twitter