Investing is a tricky business. This is especially true for first-time investors. For these individuals, they will often feel that they can never get enough assurance that they made the right decision in choosing the right product or stock they invested in. Most of the time, they will also be worried that they will not gain the return on investment they were aiming for or worse, that they will lose everything that they invested.
But whether you are confident or not about your first foray into the world of investments, as a first-time investor, there are some key, tried-and-tested principles that can help you start and stay on the right track. By following these principles, you will have a higher chance of finding success or, at the very least, contentment in your investment ventures.
Below are some of these important and useful investment principles:
Diversify to spread risks.
One effective way of reducing your risk exposure and increase potential returns in the long run is to spread risks across a wide range of investments. This means holding a mixture of different types of investments which can help cushion your portfolio from downturns. Shares, bonds, cash, and property react differently in varying conditions. As such, opting for more than one asset class can help to ensure all your investments won’t all rise or fall in value at the same time. You can also spread risks through geographical exposure and by going into long-term investing.
Be knowledgeable about all your investments.
Although you may be working with a financial adviser or investment solutions provider, it would always work to your great advantage if you take the time to study and understand the type of investments you have. When you have a good understanding of your portfolio, you minimize the risk being cheated by scrupulous individuals. You can also have a more realistic expectation of what to anticipate in terms of payouts or profits.
Invest for the long-term.
Lastly, it is quite obvious: the longer you invest, the bigger the potential effect of compound performance on the original value of your investment. In general, your investments can benefit from compounding (money multiplying itself by earning a return on the return) if you reinvest any income you receive. As long as you are careful with the types of investments you choose to go into, you won’t go wrong when you invest for the long-term.