Everyone always hope or want their investment to be profitable. Isn’t that true? Yes I know, I may sound funny when I asked this question. But come to think about it, everyone wants their investment to be profitable but do they know how? Do they have a basic principle or set of rules to follow for their investment to ensure it is profitable? Or they just invest & HOPE that they are able to be profitable somewhere down the line be it Short Term or Long Term. Whether it’s Property Investment, Mutual Fund, Commodities, Stocks or Other Investment. The Principle of Investment & Goal should be the same.
What Are The Principles to Ensure Your Investment is Profitable?
1. Invest in Long Term
This is something that you might hear from many Investors. Of course there are chances that some Investors have short term return but most successful Investors have their best return in the long term. Patience is the key to long term investment.
“If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”- Warren Buffett
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” – Benjamin Graham
2. Invest in What You Know
Don’t Invest just because someone tells you that it’s a good Investment. Do your own study & make sure you know what you are investing in. There are cases where many people fall into investment scam or losing money due to their limited understanding on the investment or product.
“Know what you own, and know why you own it.” – Peter Lynch
3. Invest in Yourself
How? By reading more books, blogs, courses & seminars related to Investment. Trust me. It actually helps when I started to learn about Investment. Instead of asking around for Investment Tips, I did my own study to learn about Investment. You can checkout my previous post about Invest in Yourself HERE
“An investment in knowledge pays the best interest.” – Benjamin Franklin
“Invest in yourself. Your career is the engine of your wealth.” – Paul Clitheroe
4. Diversify Your Portfolio
It’s good to have diversify portfolio but there are times where many investors over-diversify their portfolio. Talking about diversification, you may want to consider to diversify into few good stocks based on sector or industry but don’t forget to do your study before you invest in that company.
“The idea of excessive diversification is madness.” – Charlie Munger
5. Invest with Facts not Emotions
Remember Grasshoppa. We are Investors not Speculators. Investors do not Speculate. We invest with facts & figures not by believing or forecasting what the investment return will be in future.
“The individual investor should act consistently as an investor and not as a speculator.” – Benjamin Graham
6. Invest with Your Own Money
My advise is, only invest the money you have not the money you don’t have. Some investors gets greedy when they see some investment opportunity. Imagine what will happen if those investment doesn’t turn out well?
“You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.” – Warren Buffett
7. Watch Out for the Investment Fee or Hidden Fee
This applies to few investment platform especially in Mutual Fund. Many investors focus on the profit but they tend to overlook on the Load Fee & Management Fee. Those fee may take up around 3-5% of your profit prior investment or during investment. Aside from Mutual Fund, some Online Stock Broker are charging high Trading Fees as well. If you are seeking for higher profit in your Investment Portfolio, this is something you may want to look into.
“The grim irony of investing is that we investors as a group not only don’t get what we pay for, we get precisely what we don’t pay for.” – John Bogle
8. Be Prepared to Handle Some Risk
I hope you don’t get me wrong when I mention this. There are difference between Risk & Gamble. The ability of Handling Risk vs Taking Risk is totally different. There is always ups & downs in the market depending on the market direction. The ability of Handling Risk means we are able to handle some loss during the Bear Market. Taking Risk means you are investing blindly without knowing what you are investing in.
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” – John Bogle
“Risk comes from not knowing what you are doing.” – Warren Buffett
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” – Peter Lynch
9. Pay Your Debt First
It’s a good start when if you decide to start your investment journey but don’t forget to pay your debt first. Credit Card debts do have high interest especially if you don’t pay on time. Those high interest may affect your investment return.
“Pay off your debt first. Freedom from debt is worth more than any amount you can earn.” – Mark Cuban
There are many reason why people invest. It can be from growing their wealth, beat inflation or many others. It can be simple or it can be tough depending on how you look at it. You can invest in Property, Stocks, Mutual Fund or anything but most important of all, you need to know what are the risk & what are the product you are currently investing in. Do your study & treat those investment like your own business.