Investing can be an excellent way to boost your company finances, yet it can also be a daunting and confusing area to enter if you do not have much knowledge or prior experience. Many people will blindly enter the world of investing and this can be dangerous as without knowledge you are, essentially, gambling with your money which is not intelligent when it comes to business. Many new investors end up making the same errors so it is worth establishing a few pointers for anyone looking to make an investment so that they can make smart moves for their portfolio and grow their wealth:
Only Invest What You Can Afford To Lose
Rule number one when it comes to investing is to only use money that you can afford to lose. While there is an air of predictability if you use your head and remove emotion, investing is comparable to gambling, and there is always risk attached. Do not dig yourself into financial difficulties by using money that you cannot afford to lose when making an investment no matter how sure it may seem.
Understand Your Risk Tolerance
Every investor need to know their risk tolerance so that they can make decisions which won’t make them feel overly anxious and uncomfortable. When you become anxious or stressed over an investment, you are much more likely to make a decision based on emotion (more on this below) rather than logic which will not be the smart move to make.
Control Your Emotion
Following on from this, you should always use your head over your heart when it comes to investing. Every decision should be driven by logic and systematic analysis so that you have good reason to believe that your investment will perform well, but you must also know at what point you will liquidate your holdings and have an exit strategy in place.
Establish Clear Long-Term Goals
You need to have goals to work towards for your investments so that you can stay focused and build wealth either for you or your business. You need to think about the reasons for investing and the time frame in which you hope to get your money back.
Only Invest In What You Understand
One of the biggest mistakes that new investors make is investing in a business or market that they do not understand – cryptocurrency is a great example of this. You need to easily be able to explain how the company makes money and what the driving factors that impact the industry are. When you understand what you are investing in, it allows you to make intelligent decisions in order to maximize your returns.
Don’t Follow The Crowd
Following on from this, you should avoid following the crowd in terms of investment opportunities as this rarely works out. By the time a crowd has developed, it is often too late to capitalize and you are relying on others to dictate your movements. Although you should be listening to experts, it is also important to carry out your own research and to make your own decisions to drive your own success. You can do this by immersing yourself in the world of investments buy doing lots of reading online, joining communities, reading books, attending investment events and anything else related to the world of investing.
Diversification
You often hear that investors should diversify their portfolio and this is for good reason particularly when you are first starting out. You are spreading risk by not putting all of your eggs in one basket because if one investment does not work out as planned (a common scenario) then you still have others to fall back on. Therefore, look into making numerous small investments into different industries to spread risk.
Listen To Experts
It is important to understand what you are investing in, but unless you are an expert with a background in the industry it will still be a risk. Listening to experts in the field will help you to identify profitable short and long-term investments opportunities so that you can realize your financial goals. One good example is Dr Moors who is an internationally recognized expert in oil and natural gas policy and helps people from around the world with his ability to identify valuable investment opportunities.
Know When To Quit
Everyone makes mistakes, but the best investors will know when the time is to cut their losses and quit. This can be hard particularly when it is an investment that you had high hopes for, but it is rare for there to be a turn-around so it is a waste of time and money hoping that fortunes will change.
Review Your Investments
Keeping an eye on your investments is crucial to success so make sure that you schedule in a period where you review your portfolio on a regular basis. You should not obsess over it as this will lead to decisions based on small fluctuations, but regular reviews will help you to make the most intelligent and timely decisions.
Robo-Advisors
Robo-advisors are a relatively new trend and a great way for new investors to make smart moves. Robo-advisors are, essentially, software that acts as a financial advisor but only makes recommendations based on a complex algorithm with no emotion involved. While this may not be the most exciting way to invest, it should help you to make money and reduce risk which will allow you to reach your goals much faster.
Investing can be intimidating particularly when you first start out. It could prove to be a smart financial move for your business, but there will always be risk attached when it comes to investment so you need to determine your tolerance to risk and only ever use money that you can afford to lose. When you combine this with doing your research, using your head and diversifying your investments, it should help you to achieve your financial goals. Investing is a constant learning process so it is best to start small and to learn from any mistakes that you make along the way.
