How to become a successful investor
Fortunately; you don't have to be a genius to be a successful investor. As Berkshire Hathaway chief and investor extraordinaire Warren Buffett said in an interview, "Success in investing doesn't correlate with IQ once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing." It's true that not everyone is gifted with Buffett's calm, cool demeanor. But challenging yourself to avoid your own worst instincts will help you reach your financial goals.
Are you often attracted by fascinating "no money down, get rich quick" investment offers? Or, have you been the victim of a tricky investment scam? If you answered "yes" to either question, you're not alone. These days "investors frequently are influenced by impossible promises of great income at almost no money market risk,". That's why the investment professionals often say in a mantra-like tone: "There is no such thing as a free lunch." Now a day's such promises attracted many people to invest in get rich schemes like Multi-level Marketing (LML) and other unauthorized investment but many investors didn't understand that, the trick or cheat hide behind these fraud schemes even repeated warnings from known people and regulators. People rush into purchases even when they don't understand what they're buying and the level of the risk they are going to shoulder.
If you make your big mistakes young, consider yourself blessed. If you make a big mistake when you are up there in years that really hurts. Perhaps you have more time ahead of you than you realize, though. Perhaps it won't take as much time to make up for reversals as you are now thinking it will take. God created mistakes to teach us. The learning experience has monetary value -- not immediately, but over time. Don't let any big mistakes go to waste, try to learn out of it to not to repeat the same mistake in the future.
Whenever you start doing business or investment, you got to have a special objective or goals to be achieved. Without clear goals is like a ship without an anchor on the sea. Therefore, you need to think of the main purpose of investment and evaluate your own financial risks whether you are suitable to invest on high risk or low risk investments. Knowing your goal will help you to determine the appropriate steps and investment allocation.
No one is a perfect investor, but everyone aspires to be the best. Over the past 20 years that I've been investing, trading, and studying the stock market, insurance and other financial instruments, I've made some brilliant, timely, and good lucky calls. But I was not success in all my attempts and at least few times my decisions went wrong. Along the way, you may make a few investing mistakes, however there are big mistakes that you absolutely must avoid if you are to be a successful investor.
For instance, the biggest investing mistake that you could ever make is to not invest at all, or to put off investing until later.
All types of investments one or other way risky, but the level of risk varies depends on the nature of the investment. The key to successful investing is not to avoid risk altogether but to recognize the risks you are taking. To avoid unpleasant surprises, do your homework. Nothing beats reading the prospectuses and checking the long term performances of your investments. "People do more research and enquiry when they buy a washing machine or TV than when they invest thousands in stock."
Regardless of the amount invested in your portfolio, making good stock/investment picks requires keeping track of individual companies, their industries and overall economic trends. Before investing, ask yourself whether you have the time and expertise to do that on your own. If not, check out alternatives. In case you do not have time and expertise, the easiest way is to follow the lead of most small investors, entrust this job of investing to mutual funds or expert financial planner, leaving the headache of individual stock picking to the related experts. But don't get lazy. All investors should devote some time to researching and monitoring their portfolios. Avoid surprises by reading your funds'/company prospectuses and other documentation and useless stock pick recommendations provided by some unscrupulous people, they themselves pretend that they are the expert and market is controlled by them (not all, some websites and individuals do this). But no harm in taking stock picks advice from trusted, experienced professionals. Do your own research; don't believe in any such advices cent percent unless you're confident that, the advice is coming from a reliable source. Using tips from friends, family and internet websites like this one without doing your own research and analysis. Investing is a lot of hard work and a time consuming activity. Unless you trust someone's investing capabilities and are paying them to do it for you, be prepared to do your own digging and don't depend on what someone else tells you. The final judgment should be based on your appraisal and analysis. If you own just a handful of individual stocks, you're taking on two kinds of risk. One is the overall market risk and the other is the risk associated with a particular stock and the underlying company.
Asset Allocation - building an investment portfolio through optimal asset allocation is imperative while you endeavour to achieve your financial goals. As the name implies, asset allocation refers to distributing your investible surplus across asset classes such as equity, debt, gold, real estate or even holding cash for that matter. So by allocating assets, you are essentially adopting an investment strategy which can balance your portfolio's risk and reward keeping in mind your risk profile, your financial goals, and your investment time horizon
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