Lately I studied and made many research on how to invest correctly. The right thing to do is to read and read about investment before you dive. Buy a book in the bookstore, not just once but many. Follow the advise on how to invest but not the person or company that the author endorse. Some writers are paid writer by the company who paid them to write an article. They always recommend the company to the readers. Some of the companies though are good. Do your own research, information is everywhere nowadays.
Here are things that you should consider when investing:
1.0 Make a goal? What are you investing? For what? Is it for retirement? Vacation? Car? or College Education? Many investors made mistakes because they don't have goals and objectives. Make a blueprint of your investment.
2.0 Another thing is to consider how much you could loss. Are you okay if your investment today will decrease tomorrow into half? If you are not a risk taker you might be depressed. Invest money that you can afford to loss. Education about investing will help you adopt the nature of investing that if your money will lost half of its value you are still okay because you know that it will grow after awhile. Equity will usually double after 5 years. Stocks is higher than that but riskier.
3.0 Read Investment books and personal finance to broaden your knowledge.
4.0 Don't be trader, be an investor. What I mean is that invest for long term like ten years or perhaps you want it for retirement. If you left it for a long time like for example you are 25 years old now and you withdraw it when you reach 65 years old then you are a millionaire. I have an article How many years for an OFW to earn P3 Million?
5.0 Apply Cost Averaging. We all know that stock market is fluctuating every now and then. The technique is to invest the same amount of money every month if you are investing every month. Regardless of the market condition, invest uniformly.
|Cost Averaging. Dotted Line is averaging.|
6.0 Consult a professional if your capital is big but be careful as I have experienced many times that these professionals are sometimes just want to earn money regardless they give you good advise or bad.
7.0 Avoid watching stocks News. You just panic and might pull out your money even if you already lost some amount of money. Here is the best thing to do: when the people are selling do the opposite, buy more stocks. When they hungry or keep on buying, be careful! I have observed this kind of situation many times.
8.0 DO review your Investment Strategy and Goal regularly. Our Financial circumstances may change over time and so do our goals. Be open to the possibility of taking another approach or option if needed.
Things that you should not do:
DON'T Invest if you're deep in debt. It doesn't make sense that you invest while your debtis incurring interest. Pay your debt first before Investing.
DON'T Invest if you have no Emergency Fund. Unexpected events in life might force you to redeem your investment if you have no available cash or liquid assets. Be sure you have enough cash available anytime. Know more about Emergency Fund in my recent blog Makakaya Ko Ba?
DON'T do business with a broker or investment firm you're not familiar with. Before investing your money, make sure the broker is registered and you did a research about the company. There are a lot of forums, personal finance blogs and Facebook Group that can be your source of information. But, make sure you evaluate the information you gathered.
DON'T be attracted by high-yield investment schemes. There is no such thing as low risk, high reward Investment. If in case someone tells you that, beware of that person. Scammers often lure investors with promises of quick and huge returns through "risk-free guaranteed high-yield instruments" or some equally deceptive enticement.
DON'T get emotionally attached to investments that have served you well in the past, but that are no longer performing well or are no longer suited to your needs.
DON'T put all your eggs in one basket. Learn Diversification. As defined in Wiki, "Diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of its constituent."