Investment seems like an easy formula on the surface – you put money in, wait a little, and return more money if the circumstances turn out in your favor. That much can seem obvious, so why think too long and hard about it? Well, what differentiates investment from gambling (though some might argue it’s little) are the principles that underpin your investment approach. After all, you don’t throw money at anything and anyone, you go for the most promising options that limit risk.
After all, some investments can be quite reliable in their returns. It’s why pension and investment funds exist – to help individuals withdraw the most value they can over time. But what are the basic principles of good investment if you’re just getting started, and how can you avoid putting your money into an unhelpful space?
In this post, we’ll discuss all of that and more, as well as some tips to keep you successful:
Diversification Strategies
Any competent investor will tell you that putting all your eggs in one basket is a bad idea. Functionally, this is the same as betting all of your money on red at the roulette wheel. Diversification strategies are more than just opting to invest in many different stocks however, it also means investing in different platforms of investment. For example, assets, raw materials, property, a stock portfolio, Hero Bullion, and more. It will shield you from downturns and ensure losses are managed.
Understand Time Horizon
The trouble with investing is that it’s mostly always possible to assume value could improve in the future, especially if you’re suffering a loss. For example, cryptocurrencies tend to go through extreme valuations then huge downturns, and back again. If you’re in a downturn, you might wish to keep hold of your investment until it pays again. Time horizon is a term that defines when you let go of an investment and “cash out” so to speak. Giving yourself relatively strict periods or accepting tolerable gains can help you avoid getting greedy and leading to real problems.
Look Beyond Your Investment
It’s easy to think of any investment as a solo pursuit, siloed into one possible return that goes up or down. But the truth is that every competent investor understands that everything is connected. For example, microchip shortages might affect the stock price of Sony as they cannot manufacture game consoles as they might. We can expect the stock price of certain airplane manufacturers to rise as Boeing routinely encounters safety issues with their latest production models.
Skilled investors even look further than this, from economic policy within a nation, to the market forces being implemented on a wider scale. If you listen, learn and see patterns, you’ll begin to see that no investment is truly disconnected from the conditions that provide you value.
With this advice, you’ll be certain to implement the basic principles of good investment, and perhaps curate a more adequate outcome going forward. Make sure to give yourself the time you need to learn, and don’t assume all answers come overnight.
