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How To Invest Successfully
Not long ago investing
was easy. There were few places you could invest and
if you had money you wanted to invest, you left it to
the professional stock brokers. However, deregulation
of the financial markets has changed all this. In the
past 20 years new investment products have been launched,
changes have been made to the tax systems and retirement
plans which have altered the attractiveness of many
investment products.
Up to about 20 years ago, share investing
was purely in the domain of the wealthy. For most people
it was difficult to trade in overseas stock exchanges,
there were no such thing as cash management trusts,
installment warrants, exchange traded options, dividend
imputation, reset preference shares and endowment warrants
- to name a few. Now about 50% of investors are "mums
and dads" investors who either own shares directly
or in managed funds. Unfortunately, in recent years
many investors have been "burnt" because they
did not understand the risks of investing in financial
markets.
Governments around the world have made
it clear that it is important for people to take control
of their own financial futures. The sustainability of
government funded pensions is under pressure. If you
do not save and invest, you will suffer a significant
decline in your retirement living standard. The average
life expectancy is about 80 years, so if you retire
at 60 years of age, the savings you have accumulated
in the 40 years of your working life will need to fund
your retirement of 20 years or more.
Deregulation of financial markets, interest
rates and currencies means that the market determines
the value of investments and not government decree.
This provides opportunities for educated investors to
build wealth and for unwary investors to lose wealth.
You must understand the opportunities and risks.
The ground rule is that if you want
to be a successful investor in financial markets, you
must educate yourself about investing. Even if you put
your faith in a licensed investment advisor, not all
are competent. It is essential that you understand how
the financial markets work so that you do not put your
hard earned money in the hands of an incompetent advisor
who is only interested in the commissions available.
How can you tell whether a particular investment is
right for you? The only sure way is to become familiar
with the language used in the financial industry and
to have a sound investment strategy. Does this mean
that you should keep you money safe by putting it under
the bed or keeping it in the bank? No - but you do need
to understand the risks involved and set ground rules
for successful investing.
There are a number of ground rules in
investing that haves stood the test of time. With time,
patience and effort you can become a successful investor
in all the areas that are open to you. This will not
come overnight and you will have to be prepared for
that fact there will be times you lose money. However,perseverance
is a virtue above all others. The road is not always
easy, but nothing worthwhile is.
Here are the ground rules for successful
investing:
1. Be your own investment manager. No advisor or stockbroker
should do it for you. Only you know what your real needs
are, what your temperament is - and only you are motivated
by your own best interests, not sales commissions. It
is also more fun to do it yourself;
2. Confront risk and then reduce it through spreading
your investments;
3. Take a contrarians view to investment markets. That
is, look for opportunities and do the opposite of what
everyone else is doing;
4. Do not be put off by investment jargon. Master it
instead.;
5. NOW is the best time to start investing. Do not wait
for the markets to improve. If the share market is filled
with gloom, that is the time to buy;
6. Make good quality shares the core of your investment
strategy. Then you can rest easy when you invest in
more speculative areas;
7. Always consider tax implications of making investments
but never let tax minimization be the main objective.
The fundamental rule is to think in terms of after-tax
returns;
8. Keep up to date through reading the financial papers
and searching independent investment research websites;
9. Discussing investments is stimulating. Condition
your mind to talk to others about investing, especially
people who are more experienced and knowledgeable than
you are;
10. Do not be greedy. Discipline yourself to cut your
losses with bad investments and cash in when you have
made a reasonable profit;
11. Be patient. Rome was not built in a day. Similarly,
you may not become wealthy overnight, but you will over
time;
12. Never invest in anything you do not understand.
If a particular investment sound too good to be true
, it usually is;
13. Pay yourself first. Most people invest money they
have left over after paying the bills. Allocate yourself
the first 10% of your monthly income to build up your
investment capital. By doing this you will force yourself
to become an investor and the long term benefits will
be enormous.
If you master these 13 ground rules,
you will be a successful investor. You will rival so-called
professionals and will sleep easily at night knowing
that money is the least of your worries.
1howto.com
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