Successful investing is not just for the few “chosenones” by nature or social and educational background. Still, successful investing requires proper groundwork. If that is properly laid down in advance, any investment has the potential to great returns.
This article sets out some basic principles of the is necessary groundwork, by stating five things you must do before proceeding to any investment.
- Get Rid of Any Unnecessary Spending
Wise investors know that they should only invest sums of money remaining after they have covered all their obligations and needs. That granted, the first thing you should do find some ways to enlarge this pool of money.
There are two ways to do that: either spend less or earn more money. Sadly, most people strive to find ways to do the latter, while neglecting to see whether cutting on unnecessary expenses is at all feasible – which is often much faster and positively impacts the investor’s social and personal life.
Pet’s get practical: make a list of all useless purchases, things you forgot you bought them within the next day. Never mind if they include cheap gadgets and food you throw away for being expired, subscriptions you no longer care much about. In the course of time, such small amounts will avalanche into deposits that can be invested in something much more promising.
- Prioritize your Goals in Life
Never invest without a specific goal in mind. Only within the frame of a pre-specified plan will you be able to assess the risk involved accurately, and your willingness to accept it.
In addition, the very nature of your goals will limit your options: if they are short-termed, for instance, certain types of investing requiring years to afford meaningful returns (like the stock market) are instantly eliminated.
So, take some time to ask yourself: what is the main reason you are you investing? Become financially independent? Gain money to buy a much-desired piece of real-estate?Make a living off the returns? Save money for your children’s education? Whatever it may be, make sure you specify it BEFORE investing any amount of money whatsoever.
- Understand Your Investment Options
Make sure you understand your investment options, in a clear-headed, healthy way. Never invest in a market or industry you know nothing about. If you do insist on getting involved, then try first to learn as much as possible, from reliable, disinterested sources. Even if you plan on hiring an investment advisor to help you out, still need to have a clear understanding of what exactly your moneywill get for you.
- Build a Social Network Supporting Smart Investments Instead of Futile Spending
Changing the way you think about spending is crucial, but it won’t last if the people surrounding are of a different mindset. Make sure your social circle or network are people who prefer wise saving and investing to reckless spending and squandering.
- Properly Balance your Needs andWants
Finally, make sure you understand that needs and wants are two different things. Check your account and see which of the things you have recently bought or spend money on really met a specific need, and which just satisfied a strong desire. Getting control of the latter is the investor’s more valuable quality, one that can save him or her from serious mistakes, and get him or her out of trouble if the investment does not work out as plannedinitially.
Successful investing is an art, gained by accurate knowledge, careful thinking, wise planning, and experienced counseling. The energy and time devoted to learning itis the most important investment you will ever do.