Warren Buffett has often said; "I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches – representing all the investments that you got to make in a lifetime. And once you\’d punched through the card, you couldn\’t make any more investments at all. Under those rules, you\’d really think carefully about what you did, and you\’d be forced to load up on what you\’d really thought about. So you\’d do so much better."
You’re probably wondering why or how this would be? Majority of investors throw money around like scattering seed, saying to themselves; "I\’ll throw a little here and little there to see what happens or jump on the next IPO." However, Buffett advocates a policy of finding the best and richest soil, planting substantial amount of seed in it, and protecting it.
Our happiness has been diluted and our peace threatened by the effects of the economic crisis of last year that affected our businesses and the global stock market as a whole. Everyone is desperate to find a remedy that will cure their financial illness and help them recover their financial health or simply achieve financial freedom. Nonetheless, you must realise that there are a few things you need to know or at least apply when investing in the stock market or real estate.
First, before you even begin to invest you require the money; thus ensure that you have saved an adequate amount of money that you will be able to invest in different areas. Now, if you’re the kind of person who finds it hard to save you probably need to check how you go about it. When you get your income, do you save what is left after spending or spend what is left after saving? The latter is most efficient so get your finances in shape!
Creating a strategy that will guide you particularly when choosing what to invest is quite important. You need to know if you are investing for growth, speculation, to build or buy a house, college or retirement. Ask yourself if at all you will achieve your investment and financial goals? Look at the amount invested, length of time, rate of return or growth… The amount of money you invest in the market depends on your capacity to bear the risk.
Assuming that you have been studying the stock market, at this point you are ready to select and purchase stocks. Before you decide which company to invest in, know their history, their legitimacy and that you’re up to date with their current performance in the stock market. Do not be in a hurry and do not rely solely on good advice. Of course seeking the advice of a financial analyst or expert would be key just be careful to look out for quacks.
Additionally, look at the environment of the stock market at that particular time; you do not want to buy stocks when the stock market has plunged and lose money.
Consider dividends and their yields when buying stocks. This important indicator is the percentage rate of return that is currently realised. It is calculated by dividing the dividend by the stock price. The higher the price of the stock, the lower the yield.
Invest in different stocks and funds in order to build a diversified portfolio. Don’t put all your eggs in one basket, instead, explore; have an alternative plan ready if one area does not work out for you. Depending on your age and risk tolerance, you should have a percentage of your portfolio in stocks (of different companies), bonds and the real estate. The younger you are the better placed you are to take risks.
Finally, keep educating yourself about the markets…Stay informed on real estate and stock market; finding new investments that are right for you and are aimed towards your goals.
Remember that when it comes to the stock market, time is an investor’s best friend. Invest in the company for the long term. It gives compounding time to work its magic. The buy and hold strategy always works best.
Investing just once is not enough! You have to keep on re-investing and occasionally rebalancing your portfolio. It is the only way you will develop your risk appetite and be able to penetrate through the market and make your money work for you.