Investing is as appealing as a means of income as it is daunting. For many, the associated risks are a deterrent. One hears stories of people losing a fortune in the markets all too often. Furthermore, people who do enter eagerly tend to be naive, aiming for high-risk investments that often tank.
This doesn’t mean that the appeal of market trading is a facade. According to paxful.com, a quick look at the Bitcoin to Naira price today versus what it was when Bitcoin first came to market is a clear indicator of the amount of wealth a successful and smart crypto investment can generate. The trick is to know how to go about investing and how to decrease the risks.
Don’t Start Till You Are Financially Prepared
It is the biggest financial mistake you can make, to enter the investment markets without making sure your affairs are in order. Investing is not an all-or-nothing type of decision. First off you need to make sure that any large debts are settled. Anything that you cannot pay off within three months constitutes a large sum of debt. It would help if you viewed debt for what it is, a minus amount on your net worth. You cannot increase wealth with outstanding debt.
Along with taking control of outstanding debts, you have to have a genuinely expendable income to invest. You will not be able to see success in the markets if you are reallocating money that belongs to your budget. Not only is this a risk to your financial security, but in terms of the next tip, it is very likely to impair your judgment.
Allow Yourself To Think Clearly
What do we mean aside from the obvious? For one thing, to think clearly in the markets means that you cannot be dependent on the outcome to cover immediate expenses. If your rent money is in the markets, you will be forced to make decisions that deter potential success by having a short term date of sale.
Whatever amount of money you invest must be at least somewhat expendable, so that you have the freedom to base your decisions on the markets. You must be informed on the topic of investment. As with any industry, the stock markets have deeply nuanced rules, regulations, trends, and outcomes. A basic understanding will only get you so far and no further. Follow the careers of successful investors and try to understand what it is that you can learn from both their successes and failures.
In addition to the intricate understanding that you will gain from researching the field, you will have the foundation of knowledge on which to make swift yet concise decisions. One of the absolute worst things you can do is make rash decisions based on gut feeling. To mitigate this risk always be prepared for what you would do in multiple scenarios. It may not be as easy as formulating a set plan for when a specific stock starts to drop. The markets are too dynamic for that. Hence your responses must remain dynamic as well.
By keeping tabs on what is happening in the global economy and applying a learned insight, you could very well see an opportunity in what looks like a loss, and avoid pitfalls that others remain oblivious to. A steady and thoughtful approach is one of the critical traits of any successful investor.
A Cliche Worth Repetition
Warren Buffett is undeniably one of the most successful investors out there in the world. Others sight many of his insights in their successes, but none quite as frequently as his quote on the best practices for general investment options. “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”. This simple sentiment is not only a useful bit of advice but an astute caution against following the herd. One could quickly go into a great deal of detail about what this quote means, but the gist is simple:
If the markets sway towards an irrationally high demand for a stock or commodity, take care that you are not falling into the trap Buffet warns about. Instead, look at factors that contribute to the popularity of an investment and make an informed decision to circumvent risks.
Understand The History Of Investment
Expanding on our sentiment not to make decisions based on previous market performance, we strongly recommend acquainting yourself with the detailed history of the stock market and commodity investment in general. It is widely true of most things that the only way to prevent history from repeating itself is to study it. Whilst it is not a universally effective countermeasure, knowing what has led to failure in investment since the inception of the concept will give you a better foundation from which to work.
Going beyond preventative measures, understanding the history of investing garners insight into that subtle key element we refer to as investment nuance. An understanding of events passed doesn’t need to inform your decisions based on statistics, but rather by way of insight.
Insight Into The Consumer Market And Its Future
Back when Microsoft saw massive losses on their failing smartphone business, we received an email from a person working in marketing telling us to invest in the company. This made no sense initially, and we ignored the advice.
What we had not taken into consideration was the fact that a specialized understanding of market-related statistical models did not encompass a certain degree of the human element. Microsoft stocks shot up by over 150% in the weeks following. We asked the person who had sent the email how they had possibly foreseen this happening, and the answer was shockingly simple.
The gentleman in question has seen an early release build of Windows 10. From his marketer’s eye, he gathered the value of this single product, based on nothing but a layman’s appreciation of a product they knew people were going to like. It is crucial to understand the consumer when making smart investments; perhaps it is one of the most critical aspects of successful investments.