Saturday, April 11, 2009

Four Basic Investing Rules

Howdy? hope you are just fine, especially you that investing in the very risky investment sectors :). For everyone who haven't tried to jump into risky investment sectors such as stock market, then please take these four basic investing rules in your consideration:
1. Investing needs enough money
Investment enterprises always approach wealthy individuals such as bankers, government officials, members of House of Representatives, and etc. You can accumulate money by saving. These saving i am talking about is not just an ordinary saving, you must doing "forced saving", that is saving as much as and as often as possible. After you have enough money to invest then you shall have enough money for your next few months living costs and your assets equal to your liabilities (you must not have debts that more than value of your current assets such as house, vehicles, etc.). Please consider this too, every inheritances and sudden windfall funds shall be considered as capital, not as your income.
2. Budget enough money to invest
Please don't be a greedy investor, because greedy investors in stock market always spend ALL their money in the stock market. You can see many of the investors become greedy especially when the market is bullish. Please be a smart investor that invests money within your surplus in savings, in case market turns against you. If the market turns against you, you will not panic, and the best thing is you can invest your money by buying the undervalued shares
3. Decide your investing goals
Before you jump in the investment markets especially stock market please decide your investing goals. Ask yourself: a. do you invest in the short term, medium term, or long term?, b. do you invest for income (dividend) or for capital growth?, c. why do you invest?
Combination of your answers in those three questions are the basic for your investment plans. For example, if you want to invest for income and medium term then you can buy shares that give good and steady returns in form of dividend and keep that shares for 1 to 2 years or longer.
4. Aware of the risk
Last thing you must consider is: every investments have risk, higher risk higher return. In stock market the risks are: a. you went broke, b. companies that you invested your money in went down either to tough competitions, mistakes in managing business, or corruptions, c. the market sentiment went down because of political situation, monetary policies or regulations, and etc. that can affect the price of your shares.

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