Investing Basics

by Dan Rather on August 15, 2011

Picture of a Piggy Bank

Taking your money to the bank?

The question that often comes to the mind of every investor is how to invest with less fear and less emotional strain. I’m sure you’re asking the same too. Well, there is a way around this; Invest more. A rookie like you, I presume, will at the start think of putting your investments at a low degree. This actually means investing only in one firm and the amount you put into it isn’t so large. Well I can’t blame you for this since we’re all humans and emotions are what make us human and fear is part of our emotions.

In the world of investments, there are a few considerations one must make with regards to his or her goals. Trust me this isn’t easy, since every investment can go either way. However, your risk can be minimised if you learn how the game is played. Know what you want. One should know why they are investing in the first place. Is it for long term or short term gains? One should also know what he or she is striving to achieve. What do you intend to get out of the investment? After addressing these issues you will be able to make wiser decisions for your long-term and short-term future.

When you know what you want then you are ready for the preceding steps which are important for you to make it “big” in the investments world. In these times of global economic turndown, where you are forced to live simply, it pays to be frugal. This scenario gives you more to invest and you won’t need fast returns to support extravagant lifestyles. Furthermore, this leaves you free to think more clearly about when to buy and sell stock.

Another basic is for you the investor to resist the itch to constantly buy or sell stock until the stocks of really great companies’ trade at really cheap prices and the stock prices in the company which you have invested have soared high.

Be fearful when others are greedy and greedy when others are fearful. Basically when the investing public is confident be careful and when it is negative: it’s time to go fishing.

Always stick with what you know. If you don’t understand how a company makes its money and you don’t also understand the company’s products, avoid it.

If you are in constant need of affirmation about your investment decisions you won’t make it far in this trip. A trend that is widely recognised by successful investors such as Warren Buffet, they make outsized returns by purchasing disliked value stocks that are often ignored by the investing public.

When buying a company makes sure you look into its past records. Does it have a consistent operating history? How well does the company do in different kinds of markets, not just the good times or the latest quarter?

Look for companies that have a barrier that keeps potential competitors at bay. Businesses like these can do well because they have the power to raise prices.

If you find a company that you like, run towards investing in it full throttle. Don’t get me wrong, I don’t mean blindly. You have to understand a business better than the market does, this means that you work against the crowd. This then ensures risk protection.

Hold for life, this means that it’s worth investing in companies that only are good enough to outperform others for decades. You then have to think on your own and avoid the madness of the crowds.

With these you are good to take the dive into the investment world. How well you develop your skill will be based on how well you understand the investment game and this will in turn determine the profits you obtain from your investments.

 

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