If you are in a situation where you are considering making a large investment, here are four investing rules that you might find helpful which are:
1. Invest in what you know. Stay inside your circle of competence.
Most investors are taught to "diversify, diversify, diversify". Therefore, they bought into many mutual funds and keep small holdings in many stocks. Warren Buffett thinks diversification is for people who don't know better. By investing across the market, you will go up and down with the market. The key to outperform the market is to identify great companies and focus your investments in them.
2. Expect reasonable earnings. If it sounds too good to be true, it likely is.
Whether you are going to make use of stocks, commodities or currencies, you need the basic and advanced knowledge on investing in order to get the most returns for your capital.
Once you attained having a financial and economic background, you should start formulating a plan. One of the most common mistakes people commit is to lower their guard from circumstances that may take away our income.
3. Seek wise mentors. Surround yourself with people who have experience and have your best interests in mind.
Sometimes, the best way to embark on wealth building effortlessly is to take advantage of other's knowledge and experiences. Although some people may not want to let go of their wealth creation nuggets, you can win their favor by establishing a good relationship and rapport with such people. Instead of investing blindly, it is better to approach people who are already authorities and exceptionally successful in that niche. These people have already known what works and what does not, so you don't need to do trial and error when you approach those people to point the right way to you.
4. Protect yourself from the downside.
Ask yourself - What is the worst that could happen? If you can live with your answer, then that is a very good sign about what decision you must make in order for you to develop the investing strategies for a safer shares investment.
Conclusion
In the business world where the only thing constant is change itself, as it is in life, it pays to have a backup plan just in case things do not go as planned. In these economic times when recession is the buzzword of the day, even the more established businesses are either bailing out or in desperate need of a bailout, which only emphasizes the need to think ahead before failure catches up with the business.
I don't wish to discourage you or scare you away from an idea you would like to pursue. My goal here is to offer you a mental framework for making investment decisions.
Most endeavors we pursue don't have huge financial consequences. If you're afraid of failure or what others may think - please know that these are probably emotional fears and not financial risks. Typically, you have nothing to lose, and everything to gain. Always bet big on yourself. Go for it.
However, when the stakes are high, remember the above investing rules.
If you stick to your plan and faithfully work at it, your wealth will grow much quicker and sooner than you realize, you'll be on your way to join the millionaire club!
