Today, I want to share with you my top investing tips that every investor should know.
Creating wealth requires smart investing which is something you have to learn if you want to achieve financial freedom.
These won’t be ground breaking tips, because frankly, investing isn’t that complicated. These are the basic building block investing tips that will set you up for success…
Whether you are new to investing or been doing it for a while, I recommend you consider these tips carefully and make sure you practice them diligently, it could be the thing that changes your outcomes for the better…
My Top 12 Investing Tips
1. Education Comes First
Investing money is not something you should dive head first into.
At the very minimum you need to read a few investing books or take a few introduction to investing courses.
An understanding of the basics is crucial to ensure you know how to do things like evaluate if a stock is overvalued or understand how to determine where to buy an investment property.
Getting an education allows you to take control of your financial destiny, even if you decide to get assistance from advisors.
2. Get Financial Advice – NOT!
That’s a bit of controversy for you…
Most financial related blogs will tell you to get financial advice, but I have a different view for you.
My vision and purpose for creating The Investor’s Way was to assist people to take back control of their wealth.
For too long people have ‘outsourced’ their wealth creation to others and the results have been less than impressive.
You only have to watch current affairs television, not that I recommend you, to see the horror stories.
So this tip is actually to refer back to tip number 1, get an education so YOU know what you are doing and what to do, and then, and only then, if you want to outsource some of the tasks consider specialists in the specific strategy you are implementing.
3. Don’t Invest Money You Need for Living
You will have seen many times the notion of saving a percentage of your wage for investing purposes.
It is commonly suggested to put 10% away, and irrespective of the percentage I highly recommend you ‘pay yourself first’ and allocate something for investing from every pay you receive.
The key to this tip however, is to ensure you don’t tie up money in investments that you need to meet your ongoing living expenses…
By over committing money to investments you create more stress on your daily life and this will lead to poor investing decisions and therefore results.
Invest what you can afford to and no more.
4. Invest In What You Are Familiar
It is important when you are starting and building your wealth that you invest in assets that you are familiar with… do you prefer one asset class over another, do you know more about one over the rest.
By starting where you are familiar you build confidence and skills to move into other assets as you progress.
5. Start Investing Right Now
The thing about investing money wisely is that it grows exponentially.
Money compounds over time, the sooner you start, the sooner you can get your money working for you and not the other way around.
The returns may be small to start out in terms of dollars, but you have to get these small returns to be able to achieve the large numbers in the future.
Remember the biggest trees all started from a seed.
Start today, no procrastination allowed…
6. Set A Goal And Realistic Expectations
Decide how much money you want and by when, and calculate what it would take to get there.
For example, investing $1000 and expecting to make $100,000 from it in 5 years could be unreasonable when you first start.
I’m not saying it never happens, or can’t happen, but it’s not a common or realistic assumption to start with…
Knowing these numbers will also help you to understand the type of assets you will need to invest in and the level of risk required to get the returns you need.
7. Invest For The Long Term
Investing for wealth is a long term game, it’s just reality, accept it and move on…
As mentioned in Tip 5, the big gains come from the power of compounding.
Be prepared to stay in the game for a long time. You’ll learn a lot of things along the way that will make you a smarter investor.
You will make mistakes, but as you’re smart, you will also learn from those mistakes and do it better next time. By being in for the long term, these mistakes will also be easier to manage and recover.
Now, investing for the long run doesn’t necessarily mean buy and hold a stock forever. It just means that this is a long term game and you need to be prepared to play it for the long term.
8. Diversify Your Investments
A diversified portfolio of investments is the preferred approach and I highly recommend you pursue this as your goal.
Diversified means a spread of stocks, property, fixed interest and even a business if you are interested.
It’s one of the safest ways to safeguard your investments. But unfortunately, people still don’t do it.
Warren Buffet once said that diversification is for people who don’t know what they are doing.
To extent he is right. A lot of advice given on diversification is not great…
Diversification is not about just spreading your money across a host of stocks and hoping over time they go up as a group.
The diversification I recommend in this tip is to have investments across different asset classes and time periods.
9. Avoid Unnecessary Risk
This is a key tip to your success…
When you are in the early phase of building wealth there is a tendency to want to take additional risks to move faster.
It’s a common human trait, especially in the modern world, we want it all NOW.
However, if you are going to be successful over the long term, you need to manage risk appropriately. Incurring losses chasing fast returns will derail you faster than anything else.
Know your limits and the limits of the investments you are making and build your expectations around these limits.
10. Never Make Emotional Decisions
Your thoughts lead to your feelings, your feelings lead to your actions and your actions lead to your results…
Which means we need to be in control of our emotions when making investment decisions.
You will develop experience and skill as time progresses leading to better decisions on a consistent basis, but when you start out you won’t necessarily have the experience to guide you…
Base your decisions on solid research. Do your due diligence.
Having control of your emotions when making investment decisions will ensure better outcomes.
A good example of this problem is what people do when stock markets fall sharply… Most people panic when their stocks are plummeting and they sell, normally right at the bottom.
If you take the emotion out and realise that you are in the stock market for the long term, that markets recover, you will save yourself that loss, and even be open to the opportunity of making some money when prices start to recover.
11. Investing Is For Everyone
Investing is something everyone can and should learn how to do, it’s your money and your future we are talking about.
Nobody else is going to be as concerned about your future wealth then you are, so take control and become a savvy investor. You can do it!
12. Invest Regularly and Consistently
I’ve already mentioned the benefits of compounding…
To build on this phenomena, put money into your investments on a regular basis. It doesn’t have to be a large amount of money to make difference.
It also doesn’t have to mean putting money into an investment. Do something every day to become a better investor…
Do some research, read books, magazines, forums… you can also get some coaching to help guide you.
There you have it, my top 12 investing tips. These tips will serve you will as you build your financial freedom.
Let me know in the comments below which one resonates with you the most and how you could use these tips in your investing goals.