Unless you are born with a couple of golden spoons in your mouth it is essential that you must first learn how to save before you can teach yourself – how to become an investor.
As far as becoming an investor is concerned, it is quite easy and only requires some capital investment.
Hence, if you got some extra cash lying in your bank account, just become one today. Go buy property, stocks, shares, bonds, or even a car; which could be your daily ride or a classic collectible sportscar worth a couple of hundred thousand $$$.
However, before you go and throw your money into something that you might regret later it is crucial that you rephrase your question and focus more on how to become a successful investor.
What is Successful Investing?
Successful or profitable investing is when the Investor understands what they are putting their money into and why?
Successful Investors have full control over their investment plans, investing resources, and decisions; which allows them to gradually in a few years, successfully grow and enhance their investment portfolio.
And it’s not just luck but certain skills and attributes that they have gained while working in their field or with their own interest contribute majorly to their success.
3 Key Successful Investor Attributes
People who have actually earned huge profits from their investments and managed to achieve financial independence, as well as financial freedom mostly, had these three attributes in common.
They all possess financial knowledge; also known as financial literacy, which has taught them how financial resources such as money work; how it is earned, managed, invested and spent.
This knowledge enabled them to understand personal finance and effectively use their numerous financial skills & concepts, such as personal financial management, budgeting, and investing, to become self-sufficient and financially stable.
Financially literate people are less vulnerable to falling for fraudulent offers or traps in finance; which automatically improves their chances of saving for retirement or education. People who have this attribute are also very responsible when it comes to running a business or using debt.
It is very much interrelated to financial literacy and has its vast sets of differences. Financially educated people understand how different financial resources work.
Financial education may or may not include formal training in finance; however, it is a lot more detailed and in-depth knowledge of budgeting, investments, financial targets, superannuation, agreements, and various employment models.
They understand how financial transactions, resources, and other relevant stuff work at basic core levels.
Probably one of the most challenging attributes to practice is discipline.
No Pain, No Gain
“We must all suffer from one of two pains: the pain of discipline or the pain of regret. The difference is discipline weighs ounces while regret weighs tons.” Jim Rohn
It is also the most critical element of making successful investments and portfolio growth; because discipline removes emotions from decision-making and ultimately proves to help better achieve the investor’s long-term financial targets.
However, disciplined investing is easier said than done. Market conditions may change, incomes may fluctuate, and one’s own needs & wants may grow.
Before you put your investment plan to action and start investing, you must know a set of rules that will help you stay on track in your journey to becoming a successful investor.
The 12 Golden Investment Rules
Never Put All Your Eggs in One Basket | Rule # 1
When you start investing be diversified!
Diversification is essential to having a rock-solid and foolproof investment strategy; as it will minimize your risk of holding onto investments in unpredictable projects which can sometimes go haywire.
Invest in different types of projects that have no relevance to each other; because they either belong to totally different industries or different market environments. Their success and downfall should not affect one another. When investing in stocks, invest globally, not just in the local U.S. market. Do the same with real estate.
At Least Identify Three Wealth Building Investments | Rule # 2
People regardless of the size of their investment are known to have earned and made their money grow by putting it in assets that they could own — such as stocks & shares, real estate, or entrepreneurship. — The places where you benefit from the success and profitability of your assets.
Be Realistic About Yourself & The Expected ROI | Rule # 3
Never lie to yourself about your investment skills or the expected outcome; being over-optimistic can sometimes be extremely disastrous.
Be sure of all the things that drive and inspire you.
Be realistic about your expectations and know what returns to expect; You are doing fine as long as you make approximately 10% per year on assets you own; like property or stocks.
If you are an entrepreneur or have that mindset, then chances are you will make good profits compared to many investors who lack business acumen; maybe even a few million.
But, not without putting in years of hard & smart work; while also gaining and applying the right knowledge.
Value your time and money, and save them by selecting only the top-rated mutual funds or Exchange-traded funds a.k.a ETFs when investing in assets such as stocks. Become a real estate investor or start your small business when you have a lot of time at hand.
Be Wise, Think Big, Think Long Term, Think Success | Rule # 4
If you are about to invest a huge amount of money, then only do it on your own assets. If you are young and have a lot of money to invest then do it long term.
“If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” Warren Buffett
Earnings and risk go side-by-side. Investing in assets like real estate and stocks has made many people very rich; however, there were always equally higher risks involved.
When investing in assets always have a long-term strategy as things can and most probably will go unstable. Always plan to invest in such assets to hold your investment for at least five years. It is better if you can do 10 or more years.
Be Selective About What Or Who You Listen To | Rule # 5
You need to be extremely choosy about the information that you are feeding yourself or that is being fed to you. Avoid news sources that could lead to confusion, or compel you to make hasty investment decisions in times or conditions that could just be temporary.
There is no need to get all worked up at every hype coming from the financial market. The information you consume may determine your destiny; hence, avoid all toxic investment news, mindsets, and strategies.
In order to stay informed pick the most reputed and credible sources. And know well, why they are considered credible and reputed. Always do your own research before you invest your hard-earned money. Investment is not something that you do quickly, and never allow a salesperson to push you or a video commercial to get the best of you.
Don’t Panic | Rule # 6
Things may go off track but you must hold your position. There could be times in the financial world when the value of your assets may take a plunge (for any given reason), no matter what do not sell at this time. In fact, this is the time when you should consider buying more.
Remember that financial instruments such as shares, and bonds are supply and demand dependent, and there could be several real or made-up situations ( by big investors) affecting their value.
Timing Is Everything | Rule # 7
Other than where to invest, It is more important to know when to invest; calculate your risk, and make your investments according to that time frame. This technique is essential for selecting good investments. If you are looking to make money that can cover your next year’s expenses then invest in safer investments
For example, the money you expect to use within the next year is better to put in market funds; which are considered the safest of all investments.
One of the good investing habits to follow is using your longer-term funds only to build wealth.
Know About Your Taxes & Negotiate On The Fee | Rule # 8
If you live a retired life, always check the tax rate when putting your investment in anything outside tax-sheltered retirement funds. Also, make sure to use your tax-deductible retirement account.
Whenever possible, negotiate the fees you are going to pay for professional services. Ignore when they say “You only get your money’s worth”. Your motto should be “A penny saved is a penny earned”; If you want higher returns, you must try and save as much as you can when paying a management fee or commission.
The more you pay in commissions and management fees on your investments, the lower your returns will be.
Avoid Being Delusional | Rule # 9
Don’t expect to do better than all other investors and become rich overnight.
However, you can be better than many average players out there as long as you have the required will and talent; but don’t let it get to your head.
However, outperforming the investors of the stock market would be more difficult than for small businesses or real estate investors. There are too many capable stock market offline and online brokers working all day to earn their clients some money. Even if you hire the best dont expect any extraordinary performance; at least not for a long time period.
Trade Less & Avoid Psychics | Rule # 10
Trading too much comes into the list of bad investing habits.
Because trading more may lead to miscalculations and may result in foul-ups. Also, if you are doing non-retirement account investments then you will be expected to pay higher taxes as well as transactional costs.
And avoid psychics or people who claim to know the unknown. Nobody can predict the future; those who claim to, lie.
Don’t believe in divine “signals” or “signs”, Select rock-hard long-term investments only. Also, make it a point to never enter or exit an investment based on speculations.
Do Proper Home Work & Background Checks | Rule # 11
Before hiring someone to advise, guide, or assist you in making your investments make sure you have done enough prior research on the subject as well as the person. Without it, there is a huge possibility that you may trust and listen to the wrong people.
You must know enough to be able to evaluate their skills; as well as their background to avoid any situations that may occur due to a “conflict of interest.”
Health Is Wealth | Rule # 12
There is no second thought to that, and even the most successful investors would agree.
And the best thing about investing in your life & health is that the return is great while the risk is tiny. And these two will always be of more value to you than your other financial assets. Investing some there is a must!
Your personal life and health are the most profitable and low-risk investments. They matter considerably more than the number of your financial holdings. Don’t forget to “invest” in them as well!
When becoming an investor while using other people’s money or your own; in your investing career it is crucial to stay disciplined. Avoid news from every other source in order to stay in the right mindset.
Instead of jumping at every investment opportunity make sure to follow your investment plan religiously. Avoid bad habits like trading too much, investing a lot at one place, or investing unplanned. Always go for the best investment opportunity.
Do proper research & background checks when getting professional investment advice. Make short-term investments for income to spend and long-term investments to build wealth in the future. If you can obtain these three key attributes and follow these set of rules then investment success is inevitable.
Best wishes for your success. If you have any questions or investment tips that you would like to share then please do in the comments section below.