Invest to Financial Freedom - 5 Tips to prepare yourself for Risk
This is an articles that I joined from the following post :
Invest to Financial Freedom - 5 Tips to prepare yourself for Risk? Tips 1
Invest to Financial Freedom - 5 Tips to prepare yourself for Risk? Tips 2
Invest to Financial Freedom - 5 Tips to prepare yourself for Risk? Tips 3
Invest to Financial Freedom - 5 Tips to prepare yourself for Risk? Tips 4
Invest to Financial Freedom - 5 Tips to prepare yourself for Risk? Tips 5
Tip number 1 : Learn, learn and learn
Okay, my first tip is learn - learn how to invest. Investing is a professional skills, its involved a lot of things such as banks, funds, stocks, insurance, real estate and so much more. To be a pro investor, you need
-
1. A lot of knowledge in finance such as investment strategies.
2. Get yourself familiar with the finance tools such as how stocks market works.
3. Have the ability to gather all the finance news and keep in touch with the market trend
There are a lot of things you must control and learn in investing. So my personal advice is KEEP LEARNING. We have no choice but have to keep learning. Below are some of tips that I use everyday to learn investing:
-
1. Go to local library and read some book. I like this since the book there is FREE.
2. Buy some books and magazines. Every month I will try to make myself read at least 1 book on investing or personal finance. I also subscribe to finance magazine, such as Kiplinger.
3. Surf internet. Internet is the biggest library in the world and most of the information is free too. All you have to pay is internet fees and some of the electric fees.
4. Read My Blog! Forgive me if you feel that I’m trying to push my blog. But it is true, now everyday I read a lot of blogs on investing. Most of them are sharing their own experience and knowledge everyday. By reading their blog, I really learn a lot.
PS: If you have any new suggestion, you are always welcome to give comment on this to add more tips.
Tip number 2 : The Preparation before invest
Now you read a lot of books on investing and already get ready to invest. But please hold on first. You still need to do a lot of preparation.
Learning and reading about investing is just a preparation in terms of knowledge and skill. There are some preparations in terms of reality and money management you have to do before invest. Here are a few tips from me:
-
1. Prepare your mindset. Please invest wisely and not emotionally.
2. Pay down your debt. Please pay down those debts that need to be paid, for example, credit card debt.
3. Extra Money. Please invest using your extra money, money that you don’t use in short term.
4. Money to survive. Please make sure you life will not be affected if anything happens to your investment.
5. Don’t follow. Sometimes it is wise that you don’t follow others’ opinions (sometimes it is quite danger). You must clear what you are doing and be confident with it.
6. Risk Ratio. Please calculate the risk and returns ratio before you invest.
7. Enter and exit plan. Investing is a plan. Any changes that happen, you need to have a plan for it. You must clear with what time you can enter and what time you must exit from an investment.
PS: If you have any new suggestion, you are always welcome to give comment on this to add more tips.
Tip number 3: Build Your Own Investment Strategy
Do you like to play strategy game like Red Alert, War Craft? If you play them before you will know what the meaning of “Strategy†game. You simply using your different kind of troops and weapons, combine them, make a team work and attack your enemy.
Investment is also same. Different kind of Stocks, Bonds and funds will be your weapons to make money. So your job is how you combine them and let them work with each other and at the end of the year brings back some profits for you.
To us, as normal citizens, we want to invest in some investments that are low risk. So what we can do is just build up our own investment strategy and Diversify our investment. According to some experts, if your investment plans consist of 30 types of funds and stocks or other investment, it really can bring down the risk of overall investment.
The theory is simple, if you invest your money into Stock A. Now Stock A is changing its trend and going down. So you lost all the money. But if you diversify your investment, invest in Stock A and Stock B. While the Stock A is going down, your Stock B is going up. So even you lost your money in Stock A, but Stock B still can bring some money back to cover your loss or break even.
Here is a suggestion, if you want to invest and mange your money at low risk, put 40% of your money in bank saving account, 30% for funds, 10% go for stocks, 10% for insurance and 10% for other investment. Or… If you want more options, you may read my other posts called ways to invest your $100,000.
Tip number 4: Use the benefits of Investment Options
When we invest, we will look for stocks, bonds, real estate and much much more investment tools. And most of the time, what we concentrate is “how much I can make from this stocks?†or “What is the risk to invest in this stocks?â€Â. However we have missed out something - “what are the options that I have in this stocks?â€Â
Just like our computer, we always have some options or preference to set in almost every software. We can make changing on the software setting so it can work better for us.
Investment is same. Some investments do bring along with some options for you. However, the problem is - our brain cannot process it because we lack of this knowledge. So from now on, the next time we research an investment, why don’t we learn about the options that available from that investment? Learn the investment options, use it and benefit from it.
Tip number 5: Take good care on 3 unexpected factors
Let’s make a conclusion on the right procedure that you should care about before you invest.
First of all, you do all the research and learn A to Z of the investment. Then you do all the preparation that you should do ( Those that I mention in my tip 2). Since, now, you have the great idea on the investment, and then you should have the ability to process and make your own strategy to invest and use the benefits of the investment options that you can get. You think all the things you do is complete and the investment is 100% safe and profitable. However, I means sometimes life is not that easy, you still have the risk to lost money. Why?
When comes to investment, there are a lot of factors that outside our prediction, here is 3 that I want to share:
-
1. Human Factors - When comes to money, there are a lot of party involved. So as your investments. For example, you invest in a stock and you know the price will raise. However, because of a mistake that made by the CEO, the stock price is going down unexpected. So this considered human factors.
2. Timing - Timing is very important for investing. When you want to invest and at what level you must exit and take the profit. This is what we always call entry and exit level. If you enter the market or exit at the wrong timing, you probably will drop down the profit or even lost in the investment.
3. Yourself - Yes, yourself is the biggest unexpected factor. Sometimes, our emotion is the hardest to control. When comes to money, we always bring along our emotion. And the funny thing is, emotion does always affect our decision making. Even you have your own investing plan or strategy, because of your emotion you will forget the plan and make your wrong decision. I experienced this before!
PS: If you have any new suggestion, you are always welcome to give comment on this to add more tips.
Anyway we are not a god, so sometime there are a lot of thing that we can control. But 1 thing I believe and this is also what I learnt from my mentor - Experience will train you up and make your prediction and decision more accurate!
