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Chapter 12 — SET UP GUIDELINES
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SET UP GUIDELINES

SET UP GUIDELINES

Here are five main guidelines for successful investing.

SET UP GUIDELINES

INVEST WITH A PURPOSE

Having a specific goal to invest for is important because it will keep your investments in line. Instead of just “investing to make money,” invest for retirement, college, or a specific big purchase. You could even just have the goal of getting comfortable investing by starting with a small amount of money. Regardless of your investment method, having an initial goal is key for successful investing.

HAVE A TIME FRAME

Just as investing without goals is unwise, investing without thinking about your time frame is not a good way to start investing. Your time frame will influence not only your investment strategies but also your risk tolerance. The longer the time horizon, the more willing you should be to take on risk.

LEAVE YOUR EMOTIONS AT HOME

An investor who can put his feelings aside and look at every opportunity objectively will do much better than someone who pulls out their money from an investment as soon as they see a slight drop on price.

DIVERSIFY

Diversification is key when it comes to investing. Having all of your money invested in one company or even in the industrial sector, such as computer technology or energy, is a quick way to lose a lot of money. Sectors of the market often move together, so when something happens in the real world and all of your money is in an affected sector, you will experience devastating losses. You should have investments in:

  • At least three different industries to begin with
  • Different sized companies
  • Foreign and domestic companies
  • Bonds and treasury notes

STAY INFORMED

When investing, it is important to stay informed of not only what is happening in the markets, but also what is happening in the broader world. This will not only give you insight on how your portfolio is doing, but can also signal opportunities for future investments and potential dangers to avoid. This also means that you should become informed from multiple sources. Being informed from only one source of news is as dangerous as being completely uninformed because all of your information on the markets will be through the perspective of one individual or group. Find a few investment blogs, well-respected news sources, and a news channel or two to stay up to date. To give you a well-rounded source of information to digest do the following:

  • Find a few investment blogs
  • Well-respected news sources
  • News channel or two
  • Read SprinkleBit newsfeed

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