“Successful investment is about managing risk and not avoiding it” this quote is perfectly said by the father of value investing- Benjamin Graham which holds true while investing your hard earned money. When it comes to investment, people really get confused about where to invest, where they can find minimal risk and gain maximum profit. In this blog, we will discuss the Golden Rule of investment that will hone you into an aware investor in sync with your needs:-
Rule Number 1
Begin your race with proper planning
Training is an essential part for an athlete to win a race because it helps him to analyze his worth before standing in the ground. Similarly goes with the investor, he must figure out his net worth for a successful financial plan and the best way to do so is to draw a table between the assets and liabilities you have. Note down the factors that can affect your ability to take the risk, some of the factors can be:-
a) Young Age – Working year’s matters, a younger person can afford to wait until the investment bounce back.
b) Income- self-employed believes in bigger is better! Whereas a person with regular income goes for an investment which is risky in the short term.
c) Liable to Pay- Financial commitments like a personal loan or home loan can take you a step back for a bigger risk.
d) Industry work- The industry a person works in determines the stability of income and his ability to take the risk.
Rule Number 2
Better Knowledge, Better understanding, Better Investment!
Knowledge is the key to better returns. Most of the people invest without having a proper knowledge. There are several products in the market including insurance plan that promise better returns but have complex features. A positive way to increase your wealth for the long term is to invest 1% every year in PPF which can offer you a comfortable retirement.
Rule Number 3
Future Investment: Don’t Forget!
When you invest, the race only begins don’t think your work is done after you make an investment. You need to monitor and have an overlook in your investment and take the important measures if it loses its track. Review your portfolio in case of special situations
which includes:- Marriage, Birth of a Child, Salary Hike, Windfall, Loans and black swan situations(sudden movement in the stock market).
These three golden rules can help you to stay on the top while investing, so make sure you apply these simple rules whenever you are planning to invest.