One of the things that a modern person should do is to turn to successful bankers, traders, financial consultants, to understand how to manage their own money. This is a skill that people don’t teach at school (or just do it badly), so you can be unsure even of some basic financial things..
How does a credit card work? Who is involved in my funded retirement account and what is it all about? Should I start to postpone retirement now? What stocks does it make sense to invest in? You need to know the answer to each of the questions posed. But, more importantly, you need to have an idea of what you can do now to succeed in the future..
These investment rules will help you begin to navigate the complex world of finance. Sparing no time, familiarize yourself with them and try to apply.
1. The important thing is not how much you earn, but how much you save
This is something that parents could instill in you at a very young age, but they might not have vaccinated. Of course, it’s hard to accept if your only income is very small and barely enough to pay for basic things and needs, but this phrase still makes sense to you.
There are many stories, like about the “guy” who worked in a highly paid company and had all the signs of wealth: a big house, a sports car, first class in an airplane. But if we take a closer look, it will become clear that his expenses are very fast and probably even exceed his high income. All this means that if a guy stops working, his lifestyle will change a lot. In addition, he will remain without accumulation.
Saving is what everyone should do on a regular basis. Do not wait until you start making more money to save – because at this point you will want to spend more. Start developing a saving habit from scratch.
Rich people, people who won the lottery, are not always financially literate people. Therefore, a quick income can be spent just as quickly if you do not save.
2. Follow rule 10/10/10
Rule 10/10/10 explains that each person must follow specific proportions when it comes to personal finances.
Look at your total monthly income and divide it by 70/30. 70% of your income should go to your daily lifestyle. Of the remaining 30%, 10% should go to long-term investments and investments (stocks, bonds, ETFs). The other 10% should go to a savings account intended for a larger purchase, for example, an apartment or other asset. And the remaining 10% must be yours to enjoy, for example, travel or donations, etc..
3. Portfolio diversification
One of the most important lessons of money management is awareness of the value of diversification. Eggs should not be in one basket, because you will be left with nothing if the basket falls.
It is not wise to invest most of your savings in a company whose shares may fall after 2 weeks. Diversification is the key to success and wealth.
Having tangible assets in your hedge portfolio (opening deals to offset risks) is critical in today’s economy. With terrorism, market bubbles and inflation, it is very important that at least 25% of your portfolio is in precious metals or bonds. Invest in safe assets such as gold, which can be seen as a store of value..
4. If you are not a day trader, do not trade stocks.
Investing in long-term stocks and trying to control the market are two completely different things. The truth is that trading a day requires a whole set of skills. It is very naive (and probably arrogant) to think that you can do (without real training, experience or knowledge) what some people devote their whole lives to. So study.
Choose the companies you believe in and invest in them with the intention of staying in the black for a long period of time.
5. Realize your passion and what you can lose.
This kind of conversation arises as soon as you speak with your first finance manager or consultant. They will ask you what risks you are willing to take – and many of them will ask you to fill out a questionnaire from which they will determine how dangerous you are in terms of excitement.
When you are young, you can make risky investments because you have more time to rectify the situation if something goes wrong. But no matter how you decide to invest your money, you should know from the very beginning that you are normal about losses.
The same thing applies to business: you should never go into partnerships or use business opportunities, where if everything goes wrong you will be left in a difficult situation. You should always plan the worst, but expect the best.
When it comes to investments, don’t invest all your savings in one share. Especially if you are in such a financial situation when, if these investments are not justified, you will find yourself with nothing. This is just unnecessary emotional stress in your life..
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