Friday, 4 September 2020

Business: Best Tips For Retail Investors

Retail investors

 For many people, investing is a mystery. Investing money sensibly and successfully is far less complicated than you might think. Of course, the goal of most is to make a high profit with as little time and risk as possible. If you follow the right investment strategy, you can avoid mistakes and invest in the best possible way. But how do I avoid a disaster?

Table Of Contents:

  1. Pay attention to the basics: diversification and patience.

  2. Don't invest too much — stock market.

  3. Plan sufficient cash reserves for emergencies.

  4. Don't just listen to advisors.

  5. Choose the financial products carefully.

  6. Don't think too short term — stocks.

  7. Avoid herd instinct.

  8. Don't just invest in your own country.


Pay Attention To The Basics: Diversification And Patience:

Probably the most important rule when it comes to investments is risk diversification. If you don't diversify widely enough — in technical jargon called diversification — or if you don't know enough about it, you risk pointless money.

The idea behind this is that good risk diversification can improve the relationship between opportunities and risks.

For example, if one investment is not doing so well, another will do better, and so on. In addition, the portfolio can make profits even when the market collapses or is in a downward spiral. A good diversification enables you to secure your assets even in times of crisis. In this way, individual wrong decisions can also be better cushioned. A good strategy relies on several financial products from different areas and risk levels.

Don't invest too much — stock market:


With the right strategy, you can make a lot of money on the stock market, but the financial markets are sometimes unpredictable. Things don't always turn out the way you'd like them to. So it is an advantage to only invest as much money as you can spare.

What this means is that even if all the money you have invested is gone, you can still live normally. So you can sit out inevitable price drops without any problems.

Plan sufficient cash reserves for emergencies:

Many private investors do not pay attention to preserving their liquidity. As a result, investments must be liquidated in the event of financial bottlenecks or emergencies. Most of the time, this fast process is associated with a reduced return or loss, as you are in a tight spot at the moment of resolution. To make sure that nothing like this happens to you, save yourself a nest egg of around 3 months' net income. If you have a (large) family, you should adjust your savings accordingly.

Instead of storing the reserve in an account without interest, you can also use a call money account. In this case, the interest is usually heard, the money is protected and can be withdrawn at any time and there are usually no fees due.


Don't just listen to advisors:

It is always good to get your information from many sources. Quite clearly, advisors can be very useful and do a good job because they can make a lot of money in the investment industry by receiving commissions. Of course, this is also legitimate, but private investors should not blindly rely on the statements and recommendations of a financial advisor.

It is always wise to look at the recommended products independently and to find out more or to check whether the advantages and disadvantages according to the advisor are correct and also fit with your investment goals.

If you rate commissions or other costs as unnecessarily high, it is worth looking for alternatives yourself.

Choose the financial products carefully:

You can only have a say if you are familiar with something. It is similar to the systems. You need to understand where you are investing your money so that you will be able to make wise decisions, weigh risks, and expect realistic returns. It will be much easier for you if you choose transparent financial products — products that give you all the relevant information.

In this way, you create a good basis for deciding whether the product has a good risk/return ratio.

Don't think too short term — stocks:


Equities are ideal for a long-term investment horizon. Because they are more risky and subject to large fluctuations in value, many avoid stocks. But if you look at them over the long term, that is, over years or maybe even decades, then the equity component can easily be high.

If you are at a point in life where you need the money and that point is getting closer, then you can gradually reduce riskier investments.

Avoid herd instinct:

Make your decisions independently and not based on the vast majority. Of course, it sometimes takes courage to stand up to everyone else, but often in life, you get rewarded for it. Otherwise, you will always get the same results as everyone else. If you are acting as a herd and investing as much money as everyone is doing, then your decision is based on collective intelligence.

It becomes particularly dangerous when the vast majority are wrong.

When it comes to investments, it is better to rely on yourself, your goals, and your individual risk profile.

Don't just invest in your own country:


Many investors mainly rely on their own country when investing. If you don't think beyond that horizon, you can overlook good opportunities that are emerging in other markets.

Instead, think globally and consider national investment opportunities. In this way, you automatically diversify your portfolio even more.

1 comment: