In the article, we will talk about the rules of investing. This is a rather interesting topic, which in the modern world excites a lot of people who want to do business or their own business. We will consider the recommendations of the best specialists in this field who have made fortunes thanks to a reasonable investment.
A bit about the topic
There are investment rules, and denying them, trying to act intuitively or on the advice of newly-minted speakers, is pretty stupid. It is much more reasonable to study examples of those who have achieved significant results and are ready to share their valuable knowledge. You should not rely on luck, as in all areas of life there are certain rules that you should not break.
In order to profit from investments, it is not necessary to be the most intelligent, well-read or educated. To do this, it is enough to know how to become rich. This will help the examples of many successful investors and their lessons, which should be carefully studied.
Moreover, the above rules are not some kind of world secret - they are available to everyone and everyone. The problem is that most people prefer to dream and live without doing anything. But there are those who do not build castles in the air, and stubbornly, step by step, follow their goals. Only these people succeed, provided that they do not stop halfway.
Interestingly, Warren Buffett himself associated complete success with love. He repeatedly shared the story that he has a familiar German who survived the Holocaust. She survived only because people loved her, hid her and helped her in every way. So, if you are loved - this is the greatest and most important success in your life, according to the richest man in the world! He already knows what you really need to invest in.
Investment Rules
We will consider 5 basic postulates. Note that there is a book, "Warren Buffett's Investment Rules," in which the principles discussed in this article are examined in more detail and deeply. These professional tips will help you quickly navigate the investment business and understand in which direction you need to move, how to think and make the right decisions.
Plan
The basic rules of investing begin with a plan. It is very important to have a detailed plan, which will contain all future steps to achieve the goal. Planning is very important, as it indicates a specific goal, which should be moved in the first place. Moreover, in this way the big task is divided into several small and quite achievable ones. At the same time, W. Buffett emphasized that the plan should be presented in writing in an ideal form. You need to understand that it is unlikely to follow it exactly, but it is important to adhere to the general provisions.
Flexibility
Golden rules of investing will not work unless you are flexible. This means that we must take into account market fluctuations and changes, and adapt to them, and not complain about the stupidity of consumers. In order to get something, one must carefully observe who wants what. If you learn to adapt, you can many times increase your income. You should not focus solely on one type of investment, as in any case it can “burn out”. It is much more important to explore different industries and choose the most popular and profitable. We spoke above about the plan, and so, it should be flexible. Never strive for rigidity for your goals, make adjustments to them, make them more weighty and more perfect.
Professionalism
Warren Buffett's investment rules state that you need to rely on what you are a specialist at. This means that it is very important to understand the specifics of your work and start investing with it. Agree that it’s rather stupid, working in the field of heavy industry, to engage in the development of IT-technologies. If you want to invest in something unfamiliar to you, first study this area, and only then move on to the rules of investing.
Financial performance
Even if it seems to you that the idea is really worthwhile and it is guaranteed to make a profit, never forget about financial indicators. For the most part, one should base their activity on them, because only concrete numbers can convince. Never take your word for it, research the profit, potential, sales volumes, etc. yourself.
Guide
Jeremy Miller in Warren Buffett’s Investment Guidelines says that it’s very important to find out more about the management of the company you want to invest in. The fact is that the future depends on the people at the helm. They can be effective at this stage, but skip the next round, crash. Thus, you, the investor, will lose your money, even if initially it seemed that success was guaranteed. Always collect information about the people you deal with.
Product analysis
Buffett's investment guidelines state that a product is worth knowing as well as a guide. This means that you should know as much as possible about the product in which you invest. It is very important to study it completely and independently analyze the possible profit for several years.
Do not pay attention to the market
We said above that an important investment rule is the accounting of financial indicators. However, do not always follow the market fluctuations. This means that if you thoroughly know your product, are sure that it will make a profit, and understand the possible risks, then invest in it despite market fluctuations. But remember that you need to do this only if you are fully confident in the success and can justify it.
Do not hurry
All the rules and principles of investing in innovative projects are based on the fact that there is no need to rush to give money. If you can’t find the right object for investment in any way, in no case should you invest your money in the first enterprise you find. As a result, you will lose not only your financial assets, but also the motivation to go further, which is much worse.
Principles
The investment rules of Jeremy Miller are based on important principles, which we will discuss below. It is very important to understand the value of investing in your education and knowledge, as this alone is the guarantee of your stable success. Remember that it is not always good to invest in the most profitable enterprise. Sometimes it's better to invest in something that you really like, but it brings a little less income. Thus, you yourself will increase your profit, as you will know your product absolutely and admire it as a buyer. This principle is confirmed by personal examples of W. Buffett.
The next important principle is that you need to get rid of what you do not understand. This means that if you are not an expert in this, it is better to sell your shares and find something to your liking. Another important principle is that the investor must first flee the sinking ship. You should not hope that the situation will improve dramatically, as this happens very rarely. It’s better to immediately sell the “bad” assets in order to save not only your money, but also your nerves.
Remember the price. This is a very important factor that many people forget. If stock prices are high, then it’s better not to risk it and buy something cheaper, right? But this is the wrong choice. Remember that if the stock is expensive, then the company has a prosperous period that it can share with you. Do not be greedy, it is better to analyze the situation and consult with an expert if necessary.
The next important principle is based on the fact that you need to invest not only in domestic but also international companies. So you go to a new level. In addition to increasing your income, you will gain invaluable experience and will be able to create reserve capital in case there is a sharp decline in investment in your country. Remember that local companies are always at greater risk than international giants, which means that their level of reliability is much higher. Large companies go bankrupt much less often, since too much depends on them, and such a situation is completely unprofitable for a huge number of people.
Remember the winners and look for them. The fact is that every industry and company experiences a period of decline and boom. That is why it is very important to look for those who are at their best and invest in them. Do not forget about the diverse development and invest in what is at the rise of its popularity.
It is very important to use analytics and fresh calculations. Of course, this does not guarantee absolute success, but it will allow you to stand out from the group of uneducated investors and weed out most of the offers. However, analytics does not mean solely collecting information regarding the manual and your product. It involves viewing the news, studying schedules and calculations, checking financial reports.
Warren Buffett notes that many novice investors make a similar mistake and invest only based on short-term events. However, decision-making on this principle very often leads to failure. Do not look at upcoming events, analyze the entire history of the company.
The last important principle that the talented investor speaks of is that it is worth having patience, and perhaps this is one of the most difficult tasks. The fact is that many investors buy shares and immediately try to sell them at maximum cost, thus making a profit in the shortest possible time. However, W. Buffett advises quite different. He conducts a thorough study of the company in which he wants to invest. Sometimes it takes more than six months, but then, the investor does not plan to sell the shares, as they will be profitable for at least the next 10 years.
ICO
Many people think about the rules for successfully investing in ICOs, and for good reason. Recall that we are talking about cryptocurrency. At the moment, there are many exchanges where you can earn money, but at the same time there are very big risks. Cryptocurrency is a separate area of investment, which is very isolated, due to its specification. To make a profit and understand this topic, you have to learn from the masters of this matter, since it is very difficult to master all the nuances yourself.
ICO is a model for raising funds in new cryptocurrency projects. Investments are possible in Ethereum and Bitcoin coins. When the investment reception ends, the organizers share a certain part of the cryptocurrency between the participants. The first such project was in 2013, and it was called Mastercoin.
List of rules for a successful investor
What can be recommended to beginners? Firstly, you should create a personal investment portfolio - a certain amount of money that you will use for investing and capital turnover. Secondly, control your income and expenses, because without this, all the money will go as if to nowhere, no matter how much you earn. The next rule of investing is that you need to see the goal and not spray on the little things. They will become available to you when you achieve the main thing.
It is very important to constantly develop, as only this will allow you to get a decent profit. Not wanting to take a step forward, you only make yourself worse. Explore new trends, try different things, learn to choose. Do not keep your active in only one place; remember about diversification. Try to recoup your investment. Also, allow some risk if you know that a certain amount can be lost without consequences for the business. It is also important to remember that the main enemy of investing is emotions. In a strong excitement or apathy, you should never make any business decisions.
Remember that there will never be a 100% guarantee, so invest in yourself to develop and learn more useful information.
Summarizing the article, I want to say that your future is in your hands, and only you decide who you will be in the consumption chain - an investor or a blind and indifferent consumer.