Are you a successful investor? Look back at your past investment decisions and their results, you will get your answer. If you have suffered huge losses or have made only an insignificant gain, then may be along with your experiences you need a little more, like some guidelines for investing.
As you know that the investing world suffers from scandals, scams and dishonest companies, so putting your money in financial market will have risk of losing it completely. Hence, follow these 10 commandments for investing to keep your money safe, as reported by Investopedia.com.
1. You Should Set Clear Goals
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| You Should Set Clear Goals |
You may have many short-term and long term financial goals. Your short term financial goal could buy a car while purchasing a house can be your long-term goal. Once you are clear about your goals, choose the investment option which can offers you sufficient amount of returns to meet your expenses. It is not advisable to invest without purpose set of clear financial goals to guide your investment strategy. As there are so many types, methods and flavors of investing that, without a particular objective, you will be lost at sea.
2. Clear All Your Debts and Be Financially Sound
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| Clear All Your Debts and Be Financially Sound |
If you aim to become a successful investor, make sure that your personal finances are in order first. It is not advisable to put your money in some investment scheme when you haven’t cleared your high-interest debt. If your are drowning in overdue bills and credit card payments which are difficult to meet, consider them more serious problems before getting too deep into investing.
3. You Should Not Follow the Herd
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| You Should Not Follow the Herd |
Don’t follow the crowd without an understanding of the market. Having a herd mentality can escort you to financial blunders. If you are a passive investorwho has purchased investments with the intention of long-term appreciation and limited maintenance, then sticking to investment plans, indexes and other basis of the buy-and hold portfolio is a perfectly acceptable practice. But when you switch from passive investment to an active portfolio, then continuing with your couch potato strategy can be dangerous.
4. You Should Be Humble
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| You Should Be Humble |
When the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) markets opens in green, you should not immediately start buying stocks with the hope of its better performance in the future. Sometimes, especially during a bull market, gains are not dictated by investor trading activities but by how much the market have. You must study the market first and try to find the reasons for the market rise. At this time don’t allow yourself to become overconfident. As overconfidence often leads to overtrading, taking unnecessary risks and eventual losses when the bull turns bear.
5. You Should Be Patient
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| You Should Be Patient |
A patient investor will trade better in the market than the one who panics and sells his investment whenever the market dips or stock price falls. Selling stocks should be treated just as seriously as buying them. In case of any sudden fall in the stock price, hold it for some time. But if the stocks consistently give poor performance, wait until you can use it in a gain-loss transaction that will save you taxes. Even there can be situation that by the time you hear the bad news, it would have already settled in. Hence taking your time isn't going to make it much worse.
6. You Should Question Authority
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| You Should Question Authority |
As an investor you should develop the skill of asking and answering the right questions to the authority. CEOs, CFOs, CPAs, CFAs and all the other managing professionals should be questioned in case you find any inappropriate information in the press releases and have quires, you should ask for clarification or information to the company officials, so that you don't end up doing a bad investment.
7. You Should Show Moderation
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| You Should Show Moderation |
When you invest most of your savings in ainvestment plan, and it fails; it leaves you completely heart broken. In such a case don’t swear to leave the market and not to invest again. Instead take lessons from your failure and reinvest with better strategies.
But again don’t get too obstinate and continue investing in an unyielding stock inorder to recover your initial losses. You should show moderation and think in a positive matter, that selling a loss will fetch money to invest in it a health investment plan. Remember to diversify your investment and keep away from concentrating your money too much particular risk level or a stock.
8. Take Risk As Per Your Capacity
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| Take Risk As Per Your Capacity |
You must always examine your capacity of taking a financial risk and then purchase an investment scheme. Also plan your investment in a particular way which can fulfill both short-term and long-term financial goals without much risk involved.
9. You Should Not Ogle Thy Investment
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| You Should Not Ogle Thy Investment |
Financial market is versatile in nature. Focusing too much on the frequent rise and fall of the stock prices will make you a manic especially when you receive market updates text messages to your cell phones every five minutes. Don’t forget the fact that the more you will look into the indexes the more you want to mess around with your investments. When you often buy and sell your stocks, you need to pay the commission expenses. If you waste a little sum of money while paying commissions, don’t tend to neglect this is ultimately grasping your profits as well.
"If the job has been correctly done when a common stock is purchased, the time to sell it is almost never," says Philip Fisher, greatest investor and thiker of all time.
10. Don’t Make Heroes of Mere Men
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| Don’t Make Heroes of Mere Men |
So far there is no perfect investor born on earth. Even the famous faces in the world of investment like Warren Buffett, George Soros and Peter Lynch have all taken wrong investment decisions at times. However, these personalities can teach you a lot about investment strategies, because of their investment experience and financial success. But you must choose an investment plan only after develop a don’t understanding about it. So don’t mimic any mere investor and consider them to be your hero just because any of their investment decision brought them higher returns.
source: http://www.siliconindia.com
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