It is very easy to jump into stock investment bandwagon following others to make money, but without strong investment philosophy straight from beginning, it is quite difficult for you to be successful. Not only in stock market but in any investment decision you ever do.
It takes me years after investing in stock market to discover these basic investing rules. It is not my intention to impose new rules to investing, but you'll be on the winning side if you know the basic rule of the game.
Companies are approaching bankers, wealthy individuals and public investors asking for money. Therefore, only capable investors (at least have the money) should invest in the stock market. Though not the fastest way, saving money is the easiest method to accumulate wealth. How much money will you be saving is depend on your financial goals, income capability and time availability. I myself allocate 30 to 50 per cent of my salary as a 'forced saving' to expand my investment muscle. Find out how much you should save from Having money to invest is just not enough. After all, you aren't going to invest with your medical fund are you? Lying at home without proper medication just because you'd lost the money in the stock market should be the last thing you ever want to be happened.
Under normal circumstances, you should not seriously consider investing unless you had satisfied at least one of the three following conditions:
You have six months income worth in savings. Understanding your objectives is the major part of successful investing, and many don't have them since the very first day they start investing.
Ask yourself, do you invest:
For short-term, medium-term or long-term? For your kids' education, buying new homes or for retirement?For income (dividend) or for growth (capital appreciation)?
Specific goals can direct you to specific investment plans. Having definitive investment plans will then make your stock investment practice much easier. More importantly, you are not influenced by the crowd; not easily tempered by the bull market and not panic in bear market.
There are always risks in investment. In stock market, the risks include:
Individual Financial risk. Probability that you went broke, either because you lose your jobs or businesses. You didn't know when you get fired due to downsizing or business went down due to stiff competitions.
Companies Business risk. Probability that the companies that you invest in went down either due to stiff competitions, mistakes in business directions or corruptions in it's own management.
Stock Market risk Sometimes, the stock you invest in has nothing wrong but because the market sentiment went down, will also effect the price of your stock.
Your current assets equal to your current liabilities.
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