There are golden rules to investing money sensibly intended to help any investor reduce their financial risks. In this article are three of those rules to investing which need to be applied as a whole. Remember, these rules are not in a particular order but all need to be followed to cut the risks.
Find The Balance Between Risk and Reward
Investment involves risk. Sometimes the risk is as great as losing all your money or it may be as small as getting little growth. Risk with foreign investment increases for a number of reasons, including lack of knowledge and poor advice. Risk can be broken down into two main categories. These are:
The risk of not achieving your targets: For example, the risk of not accumulating enough money for retirement is a high risk factor. Against this, the risk of not owning a Ferrari is not a major factor.
Investment risk: This means placing your money in an investment with the potential of making a fortune or losing a fortune.
There are many ways to reduce risk. If you make high-risk investments you should expect sound returns (while fearing the worst). In the end your investment risk tolerance should be based on whether you can sleep at night.
Don't Be Greedy
This is a major problem with a lot of investors. Every year millions are lost by investors because they put their accumulated savings into what are essentially scams, promising guarantees on capital and extraordinary returns; or in extremely high-risk investments. Any guarantee of growth that seems to be out of the ordinary should be treated as such. You should stick to established brand names and financial services products that you understand. Investment is not a sprint to the finish post. It is a steady marathon.
Don't Panic
Markets fluctuate. In 1998 when local and emerging stock markets around the world collapsed, many investors jumped out of their investments at or near the bottom of the markets into money market funds... and there stayed until after the record-breaking run on various Stock Exchanges around the world in 1999. If you have made sound, long-term investment decisions you should not be spooked by short-term fluctuations. Remember investment is for the medium and long term.
By Justin Sawyer
Justin Sawyer is a writer from South Africa, offering advice on investing for beginners and writing regularly for http://www.thebestinvestments.co.za investing information portal.
Article Source: http://EzineArticles.com/?expert=Justin_Sawyer
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