Basic investment rules - description, principles and recommendations

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

In the article, let's talk about the rules of investing. This is a rather interesting topic, which in the modern world worries a lot of people who want to do business or their own business. We'll take a look at recommendations from some of the industry's top experts who have made their fortunes through smart investing.

A little about the topic

There are investment rules, and to deny them, trying to act intuitively or on the advice of new speakers, is rather stupid. It is much more reasonable to study the examples of those who have achieved significant results themselves and are ready to share their valuable knowledge. You should not rely on luck, as in all areas of life there are certain rules that should not be broken.

You don't have to be the smartest, most well-read or educated to make a profit on your investment. To do this, it is enough to know how to become rich. This will be helped by the examples of many successful investors and their lessons, which should be carefully studied.

At the same time, the above rules are not some kind of world secret - they are available to everyone. The problem is that most people prefer to dream and live by doing nothing. But there are those who do not build castles in the air, but stubbornly, step by step, follow their goals. These are the only people who succeed, as long as they don't stop half way.

Interestingly, Warren Buffett himself associated total success with love. He repeatedly shared the story that he had a German friend who survived the Holocaust. She survived only because people loved her, hid her and helped in every way. So, if you are loved - this is the greatest and most important success in your life, according to the richest man in the world! He already knows what to really invest in.

Investment rules

We will consider 5 basic postulates. Note that there is a book "Warren Buffett's Rules for Investing", which discusses in more detail and in depth the principles discussed in the article. These professional tips will allow you to quickly navigate the investment business and understand in which direction you need to move, how to think and make the right decisions.

Plan

The basic rules of investing start with a plan. It is very important to have a detailed plan that will contain all future steps to achieve your goal. Planning is very important, as it indicates a specific goal towards which you should move in the first place. Moreover, in this way a large task is divided into several small and quiteachievable. At the same time, W. Buffett emphasized that the plan should be presented in writing in the ideal version. It must be understood that it is unlikely that it will be possible to follow it exactly, but it is important to adhere to general provisions.

Flexibility

The golden rules of investing won't work if you're not flexible. This means that you need to take into account the fluctuations and changes in the market, and adapt to them, and not complain about the stupidity of consumers. To get something, you need to carefully observe who wants what. If you learn to adapt, you can multiply your income many times over. You should not focus solely on one type of investment, as it can “burn out” in any case. It is much more important to research different industries and choose the most popular and profitable ones. We talked about the plan above, and so, it must be flexible. Never strive for rigidity in your goals, make adjustments to them, make them more significant and more perfect.

Professionalism

Warren Buffett's rules for investing say you should build on what you're good at. This means that it is very important to understand the specifics of your work and start investing from it. Agree that it is rather stupid, working in the field of heavy industry, to engage in the development of IT technologies. If you want to invest in something unfamiliar, first study this area, and only then proceed to the rules of investing.

Financials

Even if it seems to you that the idea is really worthwhile and it is guaranteed to bring profit, never forget about financial indicators. Most of your activities should be based on them, because only concrete numbers can convince. Never take a word for it, explore profits, potential, sales volumes, etc.

Manual

Jeremy Miller in Warren Buffett's Rules for Investing says it's important to learn more about the management of the company you want to invest in. The fact is that the future depends on the people at the helm. They can be effective at this stage, but miss the next round, crash. Thus, you, the investor, will lose your funds, even if it initially seemed that success was guaranteed. Always gather information about the people you deal with.

Product analysis

Buffett's rules of investing say that you should know the product as well as the manual. This means that you should know as much as possible about the product in which you are investing. It is very important to study it completely and independently analyze the possible profit over several years.

Ignore the market

We said above that an important rule of investing is to take into account financial indicators. However, you should not always be led by market fluctuations. This means that if you know your product thoroughly, you are sure that itwill bring profit, and you understand the possible risks, then invest in it despite market fluctuations. But remember that you only need to do this if you are completely sure of success and can justify it.

Don't rush

All the rules and principles of investing in innovative projects are based on the fact that there is no need to rush to give money away. If you cannot find a suitable investment object in any way, in no case should you invest your money in the first enterprise that comes across. As a result, you will lose not only your financial assets, but also the motivation to move on, which is much worse.

Principles

Jeremy Miller's investment rules are based on important principles, which we will discuss below. It is very important to understand the value of investing in your education and knowledge, as this is the only guarantee of your sustainable success. Remember that it is not always good to invest in the most profitable venture. Sometimes it's better to invest in something that you really like, but brings a little less income. In this way, you yourself will increase your profits, as you will absolutely know your product and admire it as a buyer. W. Buffett confirms this principle with personal examples.

The next important principle is to get rid of what you don't understand. This means that if you are not an expert in this, it is better to sell your shares and find something to your liking. Another important principle says that the investor must first escape from a sinking ship. Do not hope that the situation will improve dramatically, as this happens very often.rarely. It is better to immediately sell "bad" assets in order to save not only your money, but also your nerves.

Remember the price. This is a very important factor that many people forget about. If stock prices are high, then it's better not to take risks and buy something cheaper, right? But this is the wrong choice. Remember that if the stock is expensive, then the company has a period of prosperity that it can share with you. Do not be greedy, better analyze the situation and consult an expert if necessary.

The next important principle is based on the fact that you need to invest not only in domestic, but also in international companies. This is how you get to the next level. In addition to multiplying your income, you will gain invaluable experience and will be able to create a reserve capital in case there is a sharp decline in investment in your country. Remember that local companies are always at risk much more than international giants, which means that their level of reliability is much higher. Large companies are much less likely to go bankrupt, because too much depends on them, and this situation is completely unprofitable for a huge number of people.

Remember the winners and look for them. The fact is that every industry and company experiences periodic ups and downs. That is why it is very important to look for those who are at their best and invest in them. Don't forget to diversify and invest in something that is on the rise of its popularity.

It is very important to use analytics and fresh calculations. Of course, this does not guaranteeabsolute success, but it will allow you to stand out from the group of uneducated investors and weed out most of the offers. At the same time, analytics does not mean only the collection of information regarding the leadership and your product. It involves watching the news, studying charts and calculations, checking financial reports.

Warren Buffett notes that many novice investors make a similar mistake and invest only based on short-term events. However, making decisions on this basis very often leads to failure. Do not look at the upcoming events, analyze the entire history of the company.

The last important principle that the most talented investor talks about is that it pays to have patience, and this is perhaps one of the most difficult tasks. The fact is that many investors buy shares and try to immediately sell them at the maximum cost, thus making a profit in the shortest possible time. However, W. Buffett advises something completely different. He conducts a thorough research of the company in which he wants to invest. Sometimes it takes more than six months, but then, the investor does not plan to sell shares, as they will be profitable for at least the next 10 years.

ICO

Many think about the rules of successful investment in ICO, and for good reason. Recall that we are talking about cryptocurrency. At the moment, there are many exchanges where you can earn money, but at the same time there are very high risks. Cryptocurrency is a separate area of investment, which stands very apart, because of itsspecifications. To make a profit and understand this topic, you will have to learn from the masters of this business, since it is very difficult to master all the nuances yourself.

ICO is a model for raising funds for new cryptocurrency projects. Investments are possible in Ethereum and Bitcoin coins. When the acceptance of investments ends, the organizers divide a certain part of the cryptocurrency between the participants. The first such project was in 2013, and it was called Mastercoin.

List of rules for a successful investor

What do you recommend for beginners? First, you should create a personal investment portfolio - a certain amount of money that you will use for investing and capital turnover. Secondly, control your income and expenses, because without this, all the money will go nowhere, no matter how much you earn. The next rule of investing is that you need to see the goal and not be scattered on trifles. They will become available to you already when you achieve the main thing.

It is very important to constantly develop, as only this will allow you to get a decent profit. By not wanting to take a step forward, you are only making things worse for yourself. Explore new trends, try different things, learn to choose. Do not keep your active in only one place, remember to diversify. Try to get your investment back. Also allow some risk if you know that a certain amount can be lost without consequences for the business. It is also important to remember that the main enemy of investing is emotions. In strong agitation or apathy, neverdon't make any business decisions.

Remember that there will never be a 100% guarantee, so invest in yourself to develop and learn more useful information.

Summing up the results of the article, I would like to say that your future is in your hands, and it is up to you to decide who you will be in the consumption chain - an investor or a blind and indifferent consumer.